Factory Output Heads Busy Week of Reports
The Federal Reserve is expected today to report a drop in U.S. industrial production in April, giving Federal Reserve policymakers more reason to lower interest rates when they meet Tuesday, analysts said.
“There are still some risks for the economy,” said Lynn Reaser, an economist at Banc of America Capital Management in St. Louis. Though consumer spending showed unexpected strength last month, the numbers for manufacturing are still weak, she said.
The Fed’s report is likely to show a 0.2% drop, the sixth decline in seven months, analysts said. The index had risen 0.4% in March, led by auto makers. Industry probably operated at 79.1% of capacity, compared with 79.4% during March.
The slowing economy has led U.S. factories to curtail production. That’s one reason payrolls fell 223,000 in April, the most in a decade, and unemployment climbed to 4.5%, the highest in 2 1/2 years. Economists say rising joblessness threatens to erode consumer spending.
The Labor Department’s weekly report on applications for unemployment benefits, set for release Thursday, is likely to show an increase of 14,000 for last week, analysts said. That would put first-time claims at 398,000, up from 384,000 the previous week and close to the five-year high of 425,000 in the week ended April 27.
A regional manufacturing report from the Federal Reserve Bank of Philadelphia, to be released Thursday, will probably show a sixth consecutive decline in May. That report is the first look at manufacturing for the current month.
A report on April consumer prices, due from the Labor Department on Wednesday, probably will show an increase of 0.2%, excluding food and energy. That would be the same as in March and down from February’s 0.3% rise, analysts said. Including food and energy, the consumer price index probably increased 0.4%, reflecting the higher cost of gasoline.
In other economic reports this week:
* Today, the Commerce Department is expected to report that business inventories fell 0.3% in March as companies adjusted their stockpiles to weaker consumer demand and business investment, analysts said. The decline would be the second in a row. Inventories also fell 0.2% in February.
* Wednesday, the Commerce Department is expected to report that starts of new housing construction declined 0.5% in April to an annual rate of 1.605 million, analysts said. Still, the expected level for April exceeds the pace of construction for all last year, the third best this decade. In March, starts declined 1.3% after reaching an 11-year high in January.
* Thursday, the Conference Board is expected to report that the index of leading economic indicators, a gauge of future economic growth, increased 0.1% in April after falling 0.3% in March, analysts said.
* Also Thursday, the Commerce Department is expected to report that the trade deficit widened in March to $29.2 billion from $27 billion in February as imports increased, analysts said.
* Friday, the Treasury Department is likely to report a budget surplus of $179 billion for April, the month annual individual income tax returns are due, up from $159.5 billion in April 2000, analysts said.
