Manufacturing rebounds

[1CAV]

Manufacturing rebounds
Empire State index, an early reading of manufacturing activity, shows sharp increase in April.
April 15, 2004: 10:17 AM EDT

NEW YORK (CNN/Money) - The Empire State Manufacturing Survey, the latest reading on the state of manufacturing, showed a sharp improvement that was better than forecasts, according to a report released Thursday.

The survey's April reading increased to 36.05 from 25.3 in March. Analysts surveyed by Briefing.com were only looking for an increase to 29.0.

The survey, released by the New York Federal Reserve, is often looked to as a bellwether of manufacturing activity in the rest of the nation as well, since it is the first index of manufacturing activity that is released every month. The reading had fallen sharply in March from a record 42.05 reading in February in the two-year old index.

The index, which surveys about 200 manufacturing executives in the state and receives replies from about half of them, showed strong improvement in just about all measures.

"The new orders and shipment indexes rose to levels suggesting substantial ongoing improvement," said the survey report. "Price indexes continued their upward climb to reach new highs, and employment indexes increased markedly, indicating an expansion in hiring activity. Future indexes remain extremely positive, and the capital expenditures index reflected escalating spending activity."

The one concern for investors is that the information about rising prices, as 57 percent of respondents reported higher prices and virtually noe reported a decline.

The higher prices, while good for manufacturers' earnings, could prompt the Federal Reserve to raise interest rates that they've kept at historically low levels for more than a year.

Wednesday's report on consumer prices, which came in with higher inflation rates than forecast, also raised the expectation of the Fed moving on rates, and the Empire State index compounds the view that the Fed will be acting sooner rather than later, said Bill Cheney, chief economist for John Hancock Financial Services.

"It fits in with the picture that the labor market is turned, inflation has turned and in a few more months they'll be tightening," said Cheney. He said that he now believes the Fed will raise interest rates in August, although he said action at the June meeting is also possible.

"Inflation bottoming out and starting to turn up is one of the things that had to happen before they got in this tightening track," he said.

[cb88]

Wow. I remember someone saying something about this kind of thing following other economic indicators.


All kidding and "told you so's" aside....This is not a shock to economic and business majors who have foretold of this upturn following the economic growth. First comes economic growth (increased sales) then follows manufacturing increases then follows job increases.

I may not be patien in some things, but the economy and business I have studied and the patterns are as reliable as the moon cycles.