U.S. Manufacturing Probably Shrank Again in February on Sales
Manufacturing in the U.S. probably contracted in February at a quicker rate than the month before as factories reduced production to match their collapsing sales, economists said before reports today.
The Institute for Supply Management’s factory index fell to 34 last month from 35.6 in January, according to the median estimate of economists surveyed by Bloomberg News. Readings less than 50 signal contraction. Other reports may show construction spending fell for a fourth straight month and consumer spending rose in January for the first time in seven months.
Factories are cutting jobs and scaling back on output and investment as the housing and credit crises squeeze domestic demand for everything from cars to appliances. President Barack Obama last month announced a stimulus package to jolt the economy out of what may be the worst recession in the postwar era and introduced a budget, with a record deficit of $1.75 trillion, designed to chart a path to long-term growth.
“Slumping global trade and weak domestic spending are depressing producer confidence and forcing companies to retrench,” said Lena Komileva, chief economist at Tullett Prebon Ltd. in London. “Depressed economic conditions and turbulent financial markets are putting pressure on corporate profits and forcing businesses to cut costs.”
The Tempe, Arizona-based ISM’s report is due at 10 a.m. New York time. A measure of prices paid may increase to 34 from 29 in the prior month, the survey said.
Consumer Spending
A Commerce Department report at 8:30 a.m. may indicate consumer spending rose 0.4 percent in January after declining for six consecutive months, according to economists surveyed. Still, that report may show incomes fell for a fourth month as the labor market deteriorated, signaling continued retrenchment.
The recession that began in December 2007 will probably persist at least through the first half of this year, according to economists surveyed, which would make it the longest downturn since 1933. The economy shrank at a 6.2 percent pace in the fourth quarter of last year, the biggest contraction since 1982, and business investment fell at a 21 percent rate cash advance payday loans.
Consumer spending, which dropped at a 4.3 percent rate in that three-month period, may slip through the first six months of this year, according to economists surveyed in February. Purchases have not contracted for four consecutive quarters since records began in 1947.
In Obama’s first address to a joint session of Congress on Feb. 24, he said the staggering economy has left “confidence shaken” and the credit freeze that’s paralyzed the banking system will need to be fixed or “our recovery will be choked off before it even begins.”
Cars, Appliances
Obama signed his $787 billion stimulus into law on Feb. 17 and his administration has unveiled measures to boost housing and banks. Also, the Federal Reserve has flooded markets with cash.
Among manufacturers, carmakers are struggling. Detroit-based General Motors Corp. last week reported the second-biggest quarterly loss in its 100-year history, as Chief Executive Officer Rick Wagoner asked the Treasury for $16.6 billion more in loans to survive through 2009.
Whirlpool Corp., the world’s biggest appliance maker, said Feb. 9 that profit will probably fall for a second straight year as the recession and a plunge in home construction stifle demand. Appliance sales in the U.S. will decline 10 percent this year, Chief Executive Officer Jeffrey Fettig said on a conference call.
Companies that rely on exports are also hurting. Honeywell International Inc., the world’s largest maker of airplane-cockpit controls, last week said 2009 sales will be lower than previously expected because of slowing demand in China and India and “weakness” in commercial aerospace. Morris Township, New Jersey- based Honeywell has cut jobs and frozen hiring because of the global slowdown.