Manufacturing, Housing Probably Improved: U.S. Economy Preview

Economists said before reports this week that manufacturers probably received more orders in April, and home sales rose, a sign the U.S. expansion is still on track.Factory bookings for long-lasting goods rose 0.3 percent last month after falling 3.9 percent in March, according to the median forecasts of 61 economists surveyed by Bloomberg News before a May 24 Commerce Department report. Other figures may show purchases of existing and new houses also climbed.

Manufacturers may keep forging ahead as automakers crank out more cars and trucks, while housing will probably benefit from record-low mortgage rates that make properties more affordable. Nonetheless, those industries alone will fail to spur a pickup in growth without bigger increases in employment throughout the economy that will propel consumer spending.“The economy is growing, but it’s just not growing at an inspiring pace,” said Brian Jones, a senior U.S. economist at Societe Generale in New York. “The production numbers look OK, the housing market looks OK, the thing we’re more concerned about is the labor market.”

A Federal Reserve report last week showed factory production rose 0.6 percent in April. About half the gain came from auto-making, which jumped 3.9 percent following a 1.2 percent increase in the prior month.

Another measure of strength, the Institute for Supply Management’s manufacturing index, climbed to 54.8 in April, the highest level in almost a year, as orders picked up. Readings greater than 50 signal growth.

‘Doing Very Well’“There’s lots of good things going on from an industrial perspective,” Art Beattie, chief financial officer of Southern Co., the largest U.S. power company by market value, said during a May 15 investor conference. “A lot of our chemical manufacturers are doing very well. Our steel manufacturers are near full capacity. Automotive production and the suppliers for those automotive plants are doing very well.”

Factory production helped sustain the expansion while the housing market stabilized.

Existing-home sales rose 3.1 percent to a 4.62 million annual rate; economists project a report from the National Association of Realtors will show May 22. A day later, figures from the Commerce Department may show sales of newly built houses rose 2.1 percent to a 335,000 pace, according to the survey median.

More than anticipated, the report showed that housing starts increased to a 717,000 annual rate in April.

Gaining Confidence Homebuilders have grown more optimistic due to the improvement in sales. The National Association of Home Builders/Wells Fargo confidence index jumped to a five-year high in May, the Washington-based group reported last week.

The Standard & Poor’s Supercomposite Homebuilding Index advanced 27 percent so far this year, outpacing a 3 percent gain in the broader S&P 500.

A more stable housing market may help lift consumers’ moods. The May’s Thomson Reuters/University of Michigan final sentiment index is projected to come in at 77.8, the same as the preliminary reading and the highest since January 2008. It would mark the first time since monthly data began in 1978 that the index advanced for nine consecutive months.