WASHINGTON (Reuters) – Factory activity expanded at a faster pace than expected in September as production and hiring increased, suggesting that manufacturing should help keep the economy out of recession.
The Institute for Supply Management said on Monday its index of national factory activity rose to 51.6 last month from 50.6 in August.
September marked the 26th straight month of expansion in a sector that has shouldered the broader economic recovery and the factory report implied the an outright contraction in output would probably be avoided.
Economists had expected the index to edge down to 50.5. A reading above 50 indicates expansion manufacturing.
"Manufacturing is not falling off a cliff. Again this is not an indicator that points to a U.S. recession without a much bigger shock out of Europe," said Alan Ruskin, a currency strategist at Deutsche Bank.
U.S. CONSTRUCTION EXPANDS ALSO
A separate report from the Commerce Department showed an unexpected rebounded in construction spending in August as outlays on state and local government building projects rose sharply.
Construction spending rose 1.4 percent to an annual rate of $799.15 billion, the Commerce Department said. Economists had forecast a 0.3 percent drop.
Stock indexes cut their losses on the data, while prices for Treasury debt pared gains. The dollar trimmed gains versus the euro.
Data last week showed that cash-rich businesses continued to invest in machinery, a trend that economists expect to hold and keep the economy expanding despite a pull back in consumer spending because of weak income.
Manufacturing accounts for about 12 percent of gross domestic product and almost 11 percent nonfarm employment.
The tenor of the manufacturing report was strengthened by a an increase in hiring last month, which could be a good omen for Friday's employment report.
The economy failed to add jobs in August, leaving the unemployment rate at a lofty 9.1 percent.
Other details of the factories survey showed production rebounding last month after contracting in August. However, new orders contracted for a third straight month, potentially pointing to a pull back in manufacturing in the months ahead.
But inventories are growing at a slower pace and the ISM viewed customers' supplies as too low, which is should boost future orders.
(Reporting by Lucia Mutikani and David Lawder)
DETROIT – The United Auto Workers union has called local leaders to Detroit on Tuesday, a strong sign that a contract deal with Ford Motor Co. is near.
Such a meeting normally means an agreement has been reached, and union bargainers brief local leaders on the details. UAW spokeswoman Michele Martin said Monday that although no deal has been finalized with the company, the union is hoping it will have one to present to the leaders.
"To get all those people here from across the country, people have to make travel arrangements," Martin said. "I think they must have some hopeful anticipation to call the meeting."
Ford spokeswoman Marcey Evans would say only that bargaining continues and it's progressing.
The four-year deal with Ford is expected to be sweeter than the contract approved by UAW employees at General Motors Co. last week. It's likely to have profit sharing instead of annual wage increases for Ford's 41,000 UAW members. It's also expected to bring down Ford's hourly labor costs, which are the highest in the U.S. auto industry.
Any deal must be approved by the membership, but that could be a problem because many expected the company to restore pay raises and other benefits they sacrificed to help Ford through tough financial times starting in 2007.
Talks between the union, Ford and GM have gone fairly smoothly this year, with Ford expected to settle more than a month ahead of the last contract reached in 2007. Four years ago, Ford and the union didn't reach agreement until Nov. 3.
Up next will be Chrysler, where the talks could be more contentious. The company isn't making as much money as Ford and GM and probably can't afford the same deals.
The UAW talks are watched closely because they set wages for more than 112,000 workers in the auto industry and set the bar for pay at auto parts makers and in other manufacturing industries.
The GM deal gives workers $5,000 signing bonuses, $1,000 a year for three years to cover inflation and at least $3,500 in profit-sharing this year. The worst GM workers can do is $11,500 over the four years of the contract. GM was able to avoid a pension increase for the first time since 1953, and Ford's terms are expected to match that.
More than 1,900 entry-level workers at GM, who make about half the roughly $29 per hour paid to a GM factory worker, got raises of more than 20 percent. Ford has only about 70 entry-level workers, and will try to lower its labor costs by hiring more of them.
(Reuters) – Shares of Eastman Kodak (EK.N) rose more than 35 percent on Monday after the company said it had no intention of filing for bankruptcy.
The company issued a statement on Friday saying it hired the law firm Jones Day which specializes in restructuring, but that it "is committed to meeting all of its obligations and has no intention of filing for bankruptcy."
Bloomberg reported on Friday the company was considering filing for bankruptcy, which sent shares tumbling. Kodak shares lost more than half their value on Friday.
Kodak shares rose 39 percent, or 30 cents, to $1.10 on Monday. Shares are still trading below levels before the bankruptcy reports surfaced.
Once synonymous with photography, Kodak has struggled with the move to digital cameras and failed to turn a profit since 2007. It has been exploring a sale of its digital imaging patents, worth an estimated $2 billion, and hired investment bank Lazard in July to explore options. It also borrowed $160 million against its credit line last week.
(Reporting by Liana B. Baker. Editing by Robert MacMillan)