Production at U.S. Industries Probably Declined at Slower Pace

Production at U.S. Industries Probably Declined at Slower Pace


May 15 (Bloomberg) -- Industrial production in the U.S. probably declined in April at the slowest pace in six months, signaling manufacturing may be stabilizing, economists said before a report today.

Output fell 0.6 percent following a 1.5 percent drop in March, according to the median estimate in a Bloomberg News survey. Other reports may show the cost of living was unchanged last month and consumer sentiment climbed this month to the highest level since September.

Companies may not cut back as deeply this quarter after paring inventories at the fastest pace on record in the first three months of the year, helping ease the economic slump. Still rising confidence has yet to give way to sustained gains in spending, indicating a recovery will be slow to develop.

“We’re continuing to contract in the second quarter but we’re contracting at a slower rate,” said Michael Englund, chief economist at Action Economics LLC in Boulder, Colorado. “We’re continuing to unwind inventories.”

The Federal Reserve’s report on output is due at 9:15 a.m. in Washington. Estimates in the Bloomberg survey ranged from a drop of 1.5 percent to a 1 percent increase.

The share of capacity in use probably decreased to 68.8 percent last month, the lowest level on record, according to the survey median.

A report from the Labor Department at 8:30 may show consumer prices stabilized in April after falling 0.1 percent the previous month. Excluding food and fuel costs, prices may have increased 0.1 percent, according to the median forecast, after a 0.2 percent gain in March.

Empire State

Also at 8:30, a report from the New York Fed may show manufacturing in the state shrank in May at the slowest pace in eight months. The Empire State index probably climbed to minus 12 from minus 14.7 in April, according to the survey. Negative numbers signal contraction.

Finally, a preliminary report from Reuters/University of Michigan may show the consumer sentiment index increased to 67 in May from 65.1 last month, according to the median forecast.

Companies trimmed inventories in the first quarter at a $103.7 billion annual rate, the biggest drop since records began in 1947, according to figures from the Commerce Department last month. At the time, economists said the drop set the stage for an improvement in economic growth toward the end of the year.

“We continue to expect economic activity to bottom out, then to turn up later this year,” Fed Chairman Ben S. Bernanke said May 5 in testimony to the congressional Joint Economic Committee. “Key elements of this forecast are our assessments that the housing market is beginning to stabilize and that the sharp inventory liquidation that has been in progress will slow over the next few quarters.”

Intel Orders

Intel Corp., the world’s largest chipmaker, is getting orders that are “a little better than expected” in the second quarter, Chief Executive Officer Paul Otellini said May 12.

“A lot depends on June,” Otellini said at a meeting at the company’s Santa Clara, California, headquarters. “So far, so good.” Last month, the company said first-quarter profit fell 55 percent because of slowing computer demand and signaled sales won’t recover in the current period.

Automakers are among the manufacturers suffering most. Auto sales dropped to a 9.3 million annual pace in April from a 9.9 million rate a month earlier.

Chrysler LLC, whose U.S. sales tumbled 48 percent in April from the same month last year as bankruptcy neared, said last week it will offer rebates of as much as $6,000 to boost demand. The Auburn Hills, Michigan-based company on May 1 idled its 22 U.S. plants, which had about 26,800 hourly workers, and auto parts suppliers also are likely to cut jobs as they shut factories.

General Motors Corp., facing a U.S.-imposed June 1 deadline to restructure or file for bankruptcy, said last week it plans to idle, partially or completely, as many as 23 stamping, engine and transmission plants through July. The temporary closings are in conjunction with GM’s plan, announced last month, to idle 13 assembly plants for as long as nine weeks in the same period.


BLOOMBERG