By Timothy R. Homan
Dec. 1 (Bloomberg) -- Manufacturing in the U.S. probably contracted in November at the fastest pace in 26 years as consumers and companies worldwide cut spending, economists said before reports today.
The Institute for Supply Management’s factory index dropped to 37 last month, the lowest level since 1982, from 38.9 in October, according to the median estimate in a Bloomberg News survey. A reading of 50 is the dividing line between expansion and contraction.
The financial crisis has spiraled into a global economic downturn that’s hurt sales here and abroad, forcing manufacturers to pare production as orders plunge. Economists increasingly are projecting that the U.S. recession will be one of the most severe in the postwar era.
“With financial turmoil spreading internationally, the likelihood of a recovery in the manufacturing sector is slim,” said Peter Kretzmer, a senior economist at Bank of America Corp. in New York.
The Tempe, Arizona-based ISM’s factory report is due at 10 a.m. New York time. Forecasts of the 53 economists surveyed range from 33.5 to 40.
A report from the Commerce Department at the same time may show spending on construction projects fell 1 percent in October, according to economists surveyed, marking the 10th decline in the last 13 months. Residential and commercial projects are being scaled back as financing dries up.
Slump to Accelerate
The U.S. economy shrank at a 0.5 percent pace in the third quarter, with business spending on equipment and software declining at a 5.7 percent rate, the biggest drop since the first quarter of 2002. Economists at Goldman Sachs Group Inc. and Morgan Stanley in New York are among those projecting the economy will contract at a 5 percent pace this quarter.
Automakers are among the hardest hit by the slump in demand. Industry figures due tomorrow are forecast to show November auto sales dropped to a 10.5 million annualized rate, the weakest pace since April 1991, a Bloomberg survey shows.
“We are all expecting the year 2009 to be a very low year in terms of demand, not only in the United States, but globally,” Carlos Ghosn, chief executive officer of Nissan Motor Co., said in a Nov. 19 interview on Bloomberg Television. “We may be facing a couple of difficult years, with very low demand.”
Regional Reports
Regional reports have already signaled that the decline in manufacturing accelerated in November. Factory activity in the Philadelphia area shrank at the fastest pace in 18 years last month, while manufacturing in New York contracted the most since record-keeping began in 2001, according to reports from the Federal Reserve.
Figures from the Institute for Supply Management-Chicago last week showed business activity for November declined the most since 1982.
The credit crisis that intensified in mid-September has worsened the outlook. Companies are cutting payrolls and investments after consumer spending in the third quarter plunged by 3.7 percent, the most in 28 years.
Fleetwood Enterprises Inc., the third-largest U.S. maker of recreational vehicles, last week said its second-quarter net loss widened as tight credit and a weak economy eroded demand for motor homes.
“Consumers are hesitant to spend given current economic circumstances, and at the same time those that wish to buy are having extraordinary difficulty obtaining loans,” Fleetwood Chief Executive Officer Elden Smith said in a statement. “We do not expect market conditions to improve in the near future and we are planning accordingly.”
The company said Nov. 24 it will eliminate about 760 jobs -- 13 percent of the 5,700 positions it had at the end of August.
Manufacturers may have cut 80,000 jobs in November, after a loss of 90,000 the month before, according to the median forecast ahead of the Labor Department’s jobs report due Dec. 5. Companies have axed approximately 1.2 million jobs so far this year.
Bloomberg Survey
=============================================
ISM ISM
Manu Prices
Index Index
=============================================
Date of Release 12/01 12/01
Observation Period Nov. Nov.
---------------------------------------------
Median 37.0 32.0
Average 37.1 33.4
High Forecast 40.0 45.0
Low Forecast 33.5 30.0
Number of Participants 53 16
Previous 38.9 37.0
---------------------------------------------
4CAST Ltd. 37.0 ---
Action Economics 38.0 45.0
Aletti Gestielle SGR 40.0 35.0
Ameriprise Financial Inc 37.5 32.0
Argus Research Corp. 40.0 ---
Banc of America Securitie 36.5 ---
Bank of Tokyo- Mitsubishi 36.9 ---
Barclays Capital 37.0 ---
BMO Capital Markets 37.0 32.0
BNP Paribas 36.0 ---
ClearView Economics 35.0 ---
Commerzbank AG 38.0 ---
Credit Suisse 36.0 30.0
Danske Bank 38.1 33.0
DekaBank 35.0 42.0
Desjardins Group 38.0 ---
Deutsche Bank Securities 36.0 ---
Deutsche Postbank AG 37.0 ---
Dresdner Kleinwort 38.0 35.0
DZ Bank 38.0 ---
First Trust Advisors 37.1 ---
Fortis 40.0 ---
Helaba 39.0 ---
HSBC Markets 36.0 30.0
IDEAglobal 38.0 33.0
IHS Global Insight 35.0 ---
Informa Global Markets 39.5 ---
ING Financial Markets 36.5 30.0
Insight Economics 35.0 ---
Intesa-SanPaulo 37.0 ---
J.P. Morgan Chase 36.0 ---
Landesbank Berlin 39.0 ---
Landesbank BW 38.5 ---
Moody’s Economy.com 37.5 ---
Morgan Stanley & Co. 36.5 30.0
National Bank Financial 38.0 ---
Natixis 37.4 ---
Nomura Securities Intl. 36.5 32.0
RBS Greenwich Capital 36.0 ---
Schneider Trading Associa 36.5 31.0
Scotia Capital 36.0 ---
Societe Generale 38.0 ---
Standard Chartered 34.0 30.0
Stone & McCarthy Research 34.0 ---
TD Securities 36.0 ---
Thomson Financial/IFR 33.5 ---
UBS Securities LLC 37.5 34.0
Unicredit MIB 37.0 ---
University of Maryland 38.0 ---
Wachovia Corp. 38.8 ---
WestLB AG 38.0 ---
Westpac Banking Co. 38.2 ---
Wrightson Associates 36.0 ---
==============================================
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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