Manufacturing, which stumbled for more than a year after the U.S. recession ended in November 2001, is hitting its stride, two Federal Reserve banks are expected to report this week.
The New York Fed's index of manufacturing in the state will probably register 34.50 in May, the 13th straight month of growth, based on the median forecast in a Bloomberg News survey. The index was 36.05 in April and a record 42.05 in February. Manufacturing in the Philadelphia area probably grew for a 12th month.
Tax cuts have given consumers and corporations money to spend. After having pared inventories last year to reduce expenses, companies are being forced to increase orders at U.S. factories to meet their own customers' demands.
"We see the economy as very strong," said Alexander Cutler, chief executive of Cleveland's Eaton Corp., the world's second-largest maker of hydraulic equipment. "What we are beginning to see now is the impact of real demand as inventories have already been burned off."
Sales by U.S. manufacturers, wholesalers and retailers rose a record 2.9% in March, and inventories rose 0.7%, the Commerce Department reported Friday. The ratio of inventories to sales fell to 1.3 months' supply, the lowest ever.
U.S. factory production last month had grown 5.1% from April 2003, the biggest year-over-year change since July 2000, according to the Federal Reserve Board's report last week.
U.S. exports in March climbed to a record $94.7 billion, helped by a weaker dollar and an expanding global economy, the Commerce Department reported.
The New York Fed's report, due today, gives the first look at industry in the current month. The Philadelphia Fed's report, due Thursday, on manufacturing in Delaware, eastern Pennsylvania and southern New Jersey probably will give a reading of 31, compared with 32.5 in April and January's 10-year high of 38.8.
"We are seeing some strength all over," said Irwin Jacobs, chief executive of San Diego-based Qualcomm Inc., the world's second-largest maker of microchips to power mobile phones, in an interview last week.
More manufacturers reported growing backlogs in April than at any time since record-keeping began in 1993, a report from the Institute for Supply Management showed earlier this month.
The group's survey in April showed that more factory purchasing managers reported delays in receiving supplies than at any time since 1979.