Business Activity Increases More Than Expected

Business activity in the United States rose more than forecast in August, adding to signs the economy is improving.

The Institute for Supply Management-Chicago said Monday that its business barometer increased to 50, the highest level since September 2008, from 43.4 in July. Fifty is the dividing line between contraction and expansion.

Automakers are likely to be at the epicenter of a rebound in manufacturing in coming months as assembly lines speed up after the government’s cash-for-clunkers plan left showrooms bare. Increasing demand from overseas and a record reduction in inventories mean that an increase in factory orders and production may last for much of the rest of the year.

It’s “a manufacturing-led recovery,” said Robert Stein, a senior economist at First Trust Advisors of Wheaton, Ill. “Much of this is probably related to the revival in auto production over the past month or so.”

Economists surveyed by Bloomberg News had forecast the index would rise to 48, according to the median of 53 projections. Estimates ranged from 46 to 52.5.

Economists watch the Chicago index for an early reading on the outlook for overall manufacturing, which makes up about 12 percent of the economy. The Institute for Supply Management is scheduled to release its August factory report on Tuesday. According to a Bloomberg survey, that measure will show expansion for the first time since January 2008.

The Chicago report’s orders gauge climbed to 52.5, the highest level in a year, from 48 in July, and the production index rose to 52.9, from 43.3.

The employment index increased to 38.7, from 35.3. A measure of prices paid for raw materials jumped to 50, from 35, while a gauge of delivery times increased to 54.6, from 49.6.

Source: NYTimes