By Courtney Schlisserman
Aug. 5 (Bloomberg) -- Service industries in the U.S. probably shrank at a slower pace in July, bringing the economy closer to emerging from the worst recession in eight decades, economists said ahead of a report today.
The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, rose to 48, the highest level in 10 months, from 47 in June, according to the median forecast of 77 economists surveyed by Bloomberg News. Readings less than 50 signal contraction.
Government efforts to unclog lending, lower borrowing costs and revive demand may be starting to pay off as companies from Union Pacific Corp. to UAL Corp. see signs demand is steadying. Even so, mounting unemployment and stagnant wages will restrain consumer spending and limit the strength of any rebound.
“The economy is starting to transition to recovery,” said Michael Gregory, senior economist at BMO Capital Markets in Toronto. “Once the dust settles, it’s going to be a sluggish rate” of recovery.
The Tempe, Arizona-based group’s figures are due at 10 a.m. New York time. Estimates ranged from 44 to 49.3.
A report from ADP Employer Services, due at 8:15 a.m., may show companies cut 350,000 workers from payrolls in July, the smallest reduction since September, according to economists surveyed. The figures from the world’s largest payroll processor have shown declines in employment since February 2008.
The Labor Department’s July jobs report is due Aug. 7. The U.S. has lost 6.5 million jobs since the recession began in December 2007, the biggest decrease of any economic slump since the Great Depression.
Factory Orders
Data from the Commerce Department may show factory orders dropped 0.8 percent in June, held back by demand for cars and aircraft, which tends to be volatile.
Stocks have gained in recent weeks amid signs the U.S. economy may soon exit from recession. The Standard & Poor’s 500 Index surpassed 1,000 this week for the first time since November and ended yesterday at 1,005.65, up 0.3 percent.
The Bloomberg U.S. Airlines index rose yesterday for a ninth consecutive day, the longest climb since its creation in June 1999, on signs the slump in travel demand was easing.
UAL, the parent of United Airlines, said traffic in July showed the smallest drop in 11 months as fare sales enticed vacationers.
Union Pacific, the second biggest U.S. railroad by sales, last month reported second-quarter profits that beat analysts’ estimates. The recent increases in fuel prices “are an indication the economy is getting stronger,” Chief Executive Officer James Young said in July 23 interview.
‘Volumes Stabilize’
“We are beginning to see Burlington Northern’s volumes stabilize in our more economic sensitive businesses,” Matt Rose, chief executive officer at Union Pacific’s larger rival, said in a statement the same day.
Housing, a component of the ISM non-manufacturing index, is another area showing signs of improvement from its worst slump since the 1930s. Construction of single-family houses jumped in June by the most since 2004, figures from the Commerce Department showed last month.
Combined sales of new and existing houses climbed in June for a third consecutive month, reaching the highest since October, figures from Commerce and the National Association of Realtors also showed.
Bloomberg Survey
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ADP ISM Non- Factory
Payroll Manu Orders
,000’s Index MOM%
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Date of Release 08/05 08/05 08/05
Observation Period July July June
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Median -350 48.0 -0.8%
Average -339 48.1 -0.7%
High Forecast -200 49.3 1.6%
Low Forecast -410 44.0 -2.1%
Number of Participants 30 77 62
Previous -473 47.0 1.2%
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4CAST Ltd. -200 48.5 -0.5%
Action Economics -330 48.0 -0.5%
AIG Investments --- 46.0 -1.1%
Aletti Gestielle SGR --- 48.0 -0.2%
Ameriprise Financial Inc -350 48.5 -0.8%
Argus Research Corp. --- 48.5 -2.0%
Banesto -345 48.1 ---
Bank of Tokyo- Mitsubishi --- 47.4 -1.2%
Bantleon Bank AG --- 47.5 -0.5%
Barclays Capital --- 48.0 0.0%
BBVA -353 48.2 1.1%
BMO Capital Markets -320 48.0 -0.5%
BNP Paribas -350 48.0 -1.0%
Briefing.com -365 48.5 0.5%
C I T I C Securities --- 49.0 ---
Calyon --- --- -0.8%
Capital Economics --- 48.0 -1.5%
CIBC World Markets --- 48.0 -2.1%
Citi --- 47.0 1.0%
ClearView Economics --- 48.0 -1.0%
Commerzbank AG --- 49.0 -1.7%
Credit Suisse --- 48.0 0.5%
Daiwa Securities America --- 48.5 -0.5%
Danske Bank --- 47.0 ---
DekaBank --- 48.0 0.0%
Desjardins Group --- 47.7 -0.3%
Deutsche Bank Securities --- 48.0 -1.0%
Deutsche Postbank AG --- 48.0 -1.3%
DZ Bank -310 48.0 -1.8%
First Trust Advisors --- 49.0 -0.5%
FTN Financial --- 49.0 ---
Goldman, Sachs & Co. --- 48.0 -1.0%
Helaba --- 48.0 -1.3%
Herrmann Forecasting -347 49.2 -0.9%
High Frequency Economics -350 47.0 -1.5%
HSBC Markets -375 49.0 -1.0%
IDEAglobal -350 49.0 0.4%
IHS Global Insight --- 49.3 ---
Informa Global Markets --- 47.5 ---
ING Financial Markets -300 47.0 0.0%
Insight Economics --- 49.0 -1.0%
Intesa-SanPaulo --- 48.0 ---
J.P. Morgan Chase --- 48.0 0.2%
Janney Montgomery Scott L -367 49.2 -1.3%
Johnson Illington Advisor --- 48.0 ---
JPMorgan’s Private Wealth --- 47.5 ---
Landesbank Berlin --- 44.0 -1.5%
Landesbank BW --- 48.0 -1.0%
Maria Fiorini Ramirez Inc --- 48.5 -0.8%
Merrill Lynch/BAS -350 48.5 1.6%
MFC Global Investment Man -315 49.0 0.3%
Mizuho Securities -375 46.0 -1.5%
Moody’s Economy.com -350 48.3 -0.7%
Morgan Keegan & Co. --- --- 1.2%
National Bank Financial --- 48.5 ---
Natixis -320 49.3 ---
Newedge --- 47.6 -0.2%
Nomura Securities Intl. -275 48.8 0.6%
Nord/LB -390 48.5 -1.5%
PNC Bank --- 48.0 -1.9%
Raymond James --- 48.3 -0.8%
RBS Securities Inc. --- 48.0 ---
Ried, Thunberg & Co. --- 49.0 ---
Schneider Foreign Exchang -255 46.8 -0.6%
Scotia Capital -380 49.0 -0.8%
Societe Generale --- 48.0 -1.1%
Standard Chartered -340 48.2 ---
Stone & McCarthy Research --- 46.6 0.0%
TD Securities -375 48.2 ---
Thomson Reuters/IFR --- 47.5 -1.1%
Tullett Prebon --- 48.0 0.4%
UBS Securities LLC --- 48.0 -1.5%
UniCredit Research --- 48.5 ---
Union Investment -410 --- ---
University of Maryland -340 48.2 -0.7%
Wells Fargo & Co. --- 47.5 -1.5%
WestLB AG -370 48.0 -1.5%
Westpac Banking Co. --- 47.0 -2.0%
Woodley Park Research -308 48.8 -1.1%
Wrightson Associates --- 49.0 ---
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To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net
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