PMI Shrinks Less Than Expected
By Shobhana Chandra
June 30 (Bloomberg) — U.S. business activity shrank less than forecast in June, a sign the economic outlook is improving heading into the second half of the year.
The Institute for Supply Management-Chicago Inc. said today its business barometer increased to 39.9, from 34.9 the prior month. Readings below 50 signal a contraction.
An easing in the manufacturing slump and stabilization in consumer spending and housing reinforce forecasts that the recession will end this year. Still, even after record inventory cutbacks, companies may wait for sustained gains in sales before committing to adding employees and boosting investment.
“The manufacturing sector collapse is diminishing,” Michael Englund, chief economist at Action Economics LLC in Boulder, Colorado, said before the report. Even so, “the numbers we’re seeing are still weak. We’ll have an anemic rebound.”
Economists projected the index would rise to 39, based on the median estimate of 58 economists in a Bloomberg News survey. Forecasts ranged from 32.5 to 44.
Home Prices Fall Less Than Expected
By Bob Willis
June 30 (Bloomberg) — Home prices in 20 major U.S. metropolitan areas fell in April at a slower pace than forecast, a sign the plunge in real-estate values is abating.
The S&P/Case-Shiller home-price index decreased 18.1 percent from a year earlier following an 18.7 percent drop in March. The measure declined 19 percent in January, the most since the data began in 2001.
Price declines are likely to keep moderating as demand steadies and distressed properties account for a smaller share of transactions. Still, the highest jobless rate in 25 years is contributing to record foreclosures, which are likely to keep depressing values for months to come even as home sales steady.
“It is looking a little bit better,” said Mark Vitner, a senior economist at Wachovia Corp. in Charlotte, North Carolina. “The largest declines are probably past. When prices stop falling the erosion in household wealth will come to an end.”
Economists forecast the index would drop 18.6 percent, according to the estimates of 33 economists surveyed by Bloomberg. Estimates ranged from drops of 17.7 percent to 19.4 percent.
Stock futures extended gains following the report. The contract on the S&P 500 index was up 0.2 percent at 9:19 a.m. in New York.
The home-price index figures aren’t adjusted for seasonal effects so economists prefer to focus on year-over-year changes instead of month-to-month.
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