Ahead of the Bell: US Manufacturing

US manufacturing index could show whether economy is rebounding after winter chill

Associated Press
US manufacturing boosted by orders and stockpiles
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In this Thursday, Jan. 23, 2014 photo, Jesus Rodriguez grinds steel at the IDEAL Group in Detroit. The Institute for Supply Management reports on U.S. manufacturing activity in February on Monday, March 3, 2014. (AP Photo/Paul Sancya)

WASHINGTON (AP) -- The Institute for Supply Management reports on U.S. manufacturing activity in March. The ISM, a trade group of purchasing managers, will release its manufacturing index at 10:00 a.m. Eastern time Tuesday.

SMALL INCREASE: Economists forecast that the index rose to 54 in March, according to a survey by FactSet, from 53.2 in February. Any reading above 50 indicates growth.

The index rose in February from 51.3 in the previous month, even though a measure of production plummeted to a five-year low. That drop was largely blamed on severely cold weather and winter storms, which closed factories and disrupted supply deliveries. A gauge of orders rose, however, suggesting production could pick up in March.

The ISM's index plummeted to 51.3 in January from 56.5 in December, a sharp drop that was also blamed mostly on cold weather.

MIXED SIGNALS FOR MANUFACTURING: Economists are closely watching reports such as the ISM's survey for clues that warmer weather will boost factory output and lift the broader economy.

So far, the signs have been mixed.

Factory production jumped in February, according to a Federal Reserve report two weeks ago, as manufacturers cranked out more cars, home electronics and chemicals. Output grew by the most in six months. Still, the rebound came after a sharp fall in January.

Meanwhile, U.S. factories received a disappointing level of orders for durable goods in February, the government said in a separate report. Orders rose 2.2 percent, but mostly because of greater demand for commercial aircraft, a volatile category. Excluding aircraft, autos and other transportation goods, orders rose just 0.2 percent.

And a key category that reflects business investment fell a steep 1.3 percent, the second setback in three months.

Last year, U.S. factories were cranking out appliances, autos and other goods at a healthy pace until harsh winter weather descended. The ISM's index rose for six straight months until dipping slightly in December. That was followed by January's sharp fall.

Auto and home sales slumped in January and February as fewer Americans ventured outdoors to take a test drive or check out homes for sale. Car sales were just above 15 million at an annual rate in the first two months of the year, below last year's 15.6 million total. Sales of existing homes fell to their lowest level in 18 months in February.

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