Storms Probably Hurt Production, Housing: U.S. Economy Preview
March 14 (Bloomberg) -- Blizzards on the East Coast and harsh weather in other parts of the U.S. probably impeded manufacturing and construction in February, representing a temporary setback to the recovery, economists said before reports this week.
Output at factories, mines and utilities may have been little changed after rising since July, according to the median estimate of 59 economists surveyed by Bloomberg News ahead of a Federal Reserve report March 15. Builders probably broke ground on the fewest houses since October, another report may show.
Manufacturers may make up for the disruptions this month as companies strive to stabilize inventories and exports climb, while the outlook for housing is less bright as foreclosures mount. Analysts anticipate Federal Reserve policy makers meeting this week will reiterate a pledge to keep interest rates low as other reports show inflation cooled last month.
“The production numbers will be hurt by the snowstorms,” said James O’Sullivan, global chief economist at MF Global Ltd. in New York. “The trend in housing starts is probably not much better than flat, as there is still a huge inventory of unsold homes.”
The gains in production from July through January represent the longest stretch of increases since the nine months through January 1998.
Leading Recovery
Manufacturers, which make up about 12 percent of the economy, will probably continue to lead the recovery as business equipment spending picks up and expanding global economies boost demand from overseas.
Investment in equipment and software increased at an 18 percent annual rate in the fourth quarter, the most since 2000, the Commerce Department said Feb. 26. Some companies are upgrading sales forecasts.
Deere & Co., the world’s largest maker of farm machinery, posted first-quarter profit that topped analysts’ estimates and raised its 2010 forecast as projections improved for agricultural-equipment sales in the U.S. and Canada.
Chief Executive Officer Samuel Allen said Feb. 17 that full-year equipment revenue will increase as much as 8 percent. Industrywide, farm machinery sales in the U.S. and Canada are expected to be about the same as last year, an improvement from a November projection of a 10 percent decline in the region.
The Standard & Poor’s Supercomposite Machinery Index, which includes companies such as Deere, has increased 8.9 percent so far this year, outperforming the broader S&P 500 Index, which climbed 3.1 percent.
Storms’ Influence
Nonetheless, the manufacturing rebound may have paused last month as factories grappled with the storms that pushed seasonal snowfall counts to records in parts of the eastern U.S.
Weekly hours worked by factory production workers fell to 40.3 in February from 40.7 in January, the biggest decline since December 2008, according to the Labor Department’s employment report March 5 that showed job losses slowed last month.
Chrysler Group LLC, the U.S. automaker run by Fiat SpA, said it suspended production for part of the third week of February at assembly plants in Michigan and Illinois because of parts shortages, said Jodi Tinson, a Chrysler spokeswoman, on Feb. 16. She confirmed the stoppage at the Warren, Michigan, pickup-truck factory was related to inclement weather.
“We don’t expect any loss of production,” Tinson said. “We’ll find ways to make it up as we go.”
Regional Gauges
Two other reports from the Fed this week will probably show manufacturing production expanded in March. The Fed Bank of New York’s factory index, due tomorrow, will probably show growth continued in March for an eighth month, according to economists’ estimates. The Fed Bank of Philadelphia’s survey, due three days later, may show a seventh month of expansion.
The market that triggered the worst recession in seven decades continues to struggle. Housing starts probably fell to a 570,000 annual pace, a 3.6 percent decline from January, according to the median forecast of economists surveyed by Bloomberg. Building permits, a sign of future construction, probably fell 3.4 percent to a 601,000 pace, economists forecast the Commerce Department will report March 16.
Consumer prices probably rose 0.1 percent in February, compared with a 0.2 percent gain the prior month, according to economists’ forecasts before the Labor Department’s March 18 report. A report the previous day may show wholesale prices fell 0.2 percent in February, economists forecast.
Fed Meeting
The lack of inflation validates the Fed’s strategy to maintain the benchmark lending rate on overnight loans between banks near zero to spur growth. Their decision on interest rates is due March 16.
The rate will stay in a range of zero to 0.25 percent through October before going up by a quarter point in each of the last two meetings of the year, according to the median forecast of economists surveyed earlier this month.
Finally, the Conference Board’s index of leading economic indicators, due out on March 18, may show a 0.1 percent gain in February after increasing 0.3 percent the prior month, according to the median forecast of economists surveyed by Bloomberg. It would mark the 11th consecutive advance.
Bloomberg Survey
==============================================================
Release Period Prior Median
Indicator Date Value Forecast
==============================================================
Empire Manu. Index 3/15 March 24.9 22.0
Ind. Prod. MOM% 3/15 Feb. 0.9% 0.0%
Cap. Util. % 3/15 Feb. 72.6% 72.5%
NAHB Housing Index 3/15 March 17 17
Housing Starts ,000’s 3/16 Feb. 591 570
Housing Starts MOM% 3/16 Feb. 2.8% -3.6%
Building Permits ,000’s 3/16 Feb. 622 601
PPI MOM% 3/17 Feb. 1.4% -0.2%
Core PPI MOM% 3/17 Feb. 0.3% 0.1%
PPI YOY% 3/17 Feb. 4.6% 5.0%
Core PPI YOY% 3/17 Feb. 1.0% 1.0%
CPI MOM% 3/18 Feb. 0.2% 0.1%
Core CPI MOM% 3/18 Feb. -0.1% 0.1%
CPI YOY% 3/18 Feb. 2.6% 2.3%
Core CPI YOY% 3/18 Feb. 1.6% 1.4%
Initial Claims ,000’s 3/18 13-Mar 462 455
Philly Fed Index 3/18 March 17.6 18.0
LEI MOM% 3/18 Feb. 0.3% 0.1%
==============================================================
source: bloomberg
