US manufacturers expand at a robust pace in March

Bloomberg

The world will have a better idea by the end of this week, but probably no definitive answer, on whether the US economy’s boom in “soft” data is being reflected in the “hard” stuff.
This week’s economic data include trade figures and factory orders, culminating in a payrolls report forecast to show 175,000 jobs added by US employers in March. An Institute for Supply Management survey indicated manufacturers continued to expand at a robust pace in March. That followed tepid figures on February consumer spending, suggesting that the largest part of the economy could limit broader expansion, at least in the first quarter.
The gap between soft data on confidence and other surveys that capture the optimism of the moment and expectations for policy, and hard data such as consumer spending that show actual performance, has been a hallmark of the economy this year. Figuring out which set is a better predictor of the economy in the coming months is critically important to the decisions companies and investors make this year. “The jury is still going to be out,” said Ryan Sweet, an economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “The underlying health of the economy is somewhere between the hard and the survey data. I don’t think it’s doing as poorly as first-quarter GDP will likely show, and I don’t think it’s a strong as the surveys suggest.”
The Federal Reserve Bank of New York, which incorporates so-called “soft” data such as surveys of consumers and factory purchasing managers into its tracking of economic growth, estimates first-quarter expansion of 2.9 percent. The Atlanta Fed, focused strictly on “hard” data including actual spending and trade that are used in a traditional calculation of gross domestic product, comes up with a figure of 1.2 percent. Those compare with a median estimate of 1.8 percent from analysts surveyed by Bloomberg.
Recent economic sentiment surveys show business leaders, manufacturers and Americans are very optimistic about the future, which explains the New York Fed’s much rosier forecast. Many of the hard numbers have been tepid or solid — but not stellar.
Another piece of “hard” data was released Monday: US construction spending rose less than estimated in February, with a 0.8 percent increase, compared with analysts’ estimate of 1 percent. Other “soft” data due this week include a non-manufacturing gauge from ISM for March and the weekly Bloomberg Consumer Comfort Index. Last week, the Conference Board said its index on consumer confidence rose to a 16-year high in March, posting an increase that exceeded the expectations of all economists in the Bloomberg survey. While the sharp rise in sentiment has coincided with a period of rising stock prices and a firming of the labor market, it’s also been tied to expectations of growth-boosting policies, such as tax cuts.
The February report on personal spending showed a rise of just 0.1 percent in February after a 0.2 percent gain a month earlier. But the disappointing start to the year for Americans’ spending probably won’t be the story for the rest of 2017 as faster income growth, higher confidence and a robust labor market support a rebound.