US manufacturing sector grows in March

Auto sales headed toward best month in 10 years

WASHINGTON, April 1, (AP): US manufacturers expanded in March, ending a five-month streak of declining factory activity.

The Institute for Supply Management said Friday that its manufacturing index rose to 51.8 last month from 49.5 in February. Any reading above 50 signals growth.

The increase suggests that US factories are adapting to the turmoil abroad, where a stronger dollar and weakening economies in China, Japan and elsewhere have hurt sales. But the details of the survey-based report were somewhat uneven. New orders and production improved, but the measure of employment at manufacturers contracted in a sign that factories are letting workers go.

“Manufacturing activity is stabilizing,” said Joshua Shapiro, chief US economist at the forecaster, MFR.

Still, Shapiro noted that “dollar strength and weak growth in many important international markets are going to continue to weigh on US producers, and we expect the recovery in the manufacturing sector in the months ahead to be a muted one.”

The setback in employment meshed with the government jobs report released separately on Friday, which showed that manufacturers shed 29,000 workers in March and 18,000 in February, in an otherwise healthy job market anchored by improving demand for homes, health care, and meals at restaurants.

Of the 18 industries in the ISM report, a dozen reported growth. Factories in primary metals, food, electronics and plastics and rubber products, among others, viewed conditions as improving.

Other manufacturing indicators have created a hazy outlook for the sector.

US manufacturing output rose 0.5 percent in January, as auto, furniture and food production advanced, the Federal Reserve reported earlier this month. But the Commerce Department found in a separate report a stiff 2.8 percent decline during February in orders for long-lasting, durable goods.

Falling demand from overseas customers has roiled the manufacturing sector, as the stronger dollar had made American products pricier in foreign markets.

The ISM, a trade group of purchasing managers, surveys about 200 US companies each month.

Meanwhile, US consumer sentiment slipped last month to lowest level since October with Americans worried about the country’s economic outlook, the University of Michigan said Friday.

The university’s index of consumer sentiment dipped to 91 in March, from 91.7 in February. Richard Curtin, chief economist of the Michigan surveys, said consumers’ dim view of the economy offset improvement in their own finances. Last month’s reading was the lowest since the index registered 90 in October. A year earlier, it stood at 93.

Signs of economic weakness and rising gasoline prices have taken a toll on spirits.

AAA says the average gallon of US gasoline costs $2.06, a 17 percent hike from the $1.76 they were paying a month ago.

Americans have grown cautious about spending. Consumer spending ticked up just 0.1 percent in February, same as in December and January.

Still, the job market is healthy. The government reported Friday that employers added 215,000 jobs in March. The unemployment rate rose to 5 percent from 4.9 percent in February but only because so many Americans came off the sidelines and started looking for work.

The economy grew at a lackluster 1.4 percent annual pace from October through December and might be even worse the first three months of 2016: Citing weak consumer spending, many economists have cut their first-quarter forecast below 1 percent.

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Ford, Nissan and Fiat Chrysler each reported big US sales gains in March as the auto industry appeared to be headed for its best month in more than a decade.

Even General Motors, which has been cutting back on sales to rental car companies, saw a slight sales increase and said its retail sales to individual buyers rose 6 percent.

The increases showed that Americans are still buying cars and trucks in big numbers, despite predictions by some analysts and dealers that sales have peaked.

“Sales in the first quarter of this year continue to expand, and the overall retail mix suggests consumers are still feeling confident,” said Eric Lyman, vice president of industry insights for the TrueCar.com auto pricing site.

Nissan sales were up 13 percent, hitting a record for any month in its history. At Fiat Chrysler and Ford, sales were up 8 percent, while they grew 0.9 percent at General Motors. Ford and Fiat Chrysler posted their best March numbers in a decade.

Industry analysts expect March sales to rise 7 percent to 8 percent over a year ago by the time automakers finish reporting numbers on Friday. Kelley Blue Book says sales should total around 1.66 million cars and trucks for the month, which could be the biggest number for any month since July of 2005.

Relatively low gas prices, sweet lease deals, low interest rates, easy-toget loans and an aging fleet of cars are driving the increase.

But some analysts say there are troubling signs for automakers beneath what could be record numbers. Last month had two more selling days than a year ago, and spending on discounts is on the rise. Also increasing are lowprofit sales to rental car companies, which some automakers use to boost their numbers.

Discount spending, while good for new-car buyers, cuts profits and hurts used car values. High incentive spending is one of the factors that led to the industry’s financial troubles in 2008. TrueCar said automakers averaged just over $3,000 in discounts per vehicle in March, up more than 10 percent from a year ago.

The increase comes mainly because automakers are having trouble selling cars as the US market shifts to trucks and SUVs, according to J.D. Power and Associates. Discounted cars can push down used car values so buyers have less to trade in, said Thomas King, a J.D. Power vice president. “Significant declines in the value of used cars would disrupt consumers’ ability to buy new vehicles,” King said in a statement.

Incentive spending last month rose toward recession-era levels, King said. Discounts on cars grew to 12.3 percent of the manufacturer’s sticker price last month, but truck and SUV discounts stayed stable at 8.2 percent.

At Fiat Chrysler, car sales fell 34 percent for the month, but truck and SUV sales rose 23 percent. The company sold 34,780 cars and 178,407 SUVs.