Glimmers of hope on US economy

Glimmers of hope on US economy
By Sarah O’Connor in Washington
Copyright The Financial Times Limited 2009
Published: May 1 2009 16:20 | Last updated: May 1 2009 16:20
http://www.ft.com/cms/s/0/c6316d1e-3661-11de-af40-00144feabdc0.html


The US manufacturing sector is still shrinking but at a much slower pace, a key survey showed on Friday, while battered US consumers started to feel more confident about the economy.

The number of new orders factories are receiving looks to be steadying, according to the Institute for Supply Management’s factory index. The index has been below 50 – which shows the sector is shrinking – for 15 months, but in April it edged to its highest level in 7 months as the pace of the contraction eased.

The figure, which rose to 40.1 from 36.3 in March, was higher than economists expected and prompted further optimism from those who believe the most brutal phase of the recession is over.

“We have been seeing…contraction at a very rapid rate and now that rate is slowing dramatically,” said Kurt Karl, head of economic research at Swiss Re. “It means basically that in three months we could be expanding.”

Norbert Ore, chair of the ISM survey committee, said it was “the first report that we’ve seen in quite some time that we can call very encouraging.”

He highlighted the improvement in the index for new orders, which has steadily improved from 23.1 to 47.2 over the past five months. ”While manufacturing is still declining, all of the signs are positive toward a reversal of that decline and much more so than anything we’ve seen than in the last several months,” he added.

That mood is filtering through to ordinary consumers, according to a separate survey on Friday, which showed that confidence has recovered to levels last seen in September 2008, just before the economy tipped over the brink.

The Reuters/University of Michigan consumer confidence index rose to 65.1 in April from 57.3 in March, more than analysts expected. It crashed to a 30-year low of 55.3 in November.

Glimmers of improvement in housing markets and other areas have helped to lift confidence, though there are few signs that has translated into higher spending, in the face of the worst unemployment since the 1980s.