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Stephen Dunphy / Times staff columnist
Manufacturing outlook gets brighter

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The Institute of Supply Management's index surged in yesterday's report, with its string of consecutive months above the 50 reading now standing at seven.

April construction spending rose 1.3 percent and hit — yup, you guessed it — another record high.

Great; what about jobs? Again, manufacturing may hold the key. Michael Alfstad, president of RW Smith Fixed Income, Bellevue, says that if manufacturing "continues to show job gains of 20,000 to 30,000 a month, the carry-over effect on the service side will be noticeable quite soon."

How's it possible that manufacturing suddenly is the darling of the economy? Alfstad said: "A weaker dollar, the surge of consumer activity in China, the return to life of the Japanese economy and the emergence of a truly global economy all carry some part of the complete answer."

What other surprises are in store this month? Here's a look at some upcoming economic events that could move markets:

Thursday: Check initial jobless claims. They are still falling and now total less than 1 percent of total payrolls.

Friday: Look for another strong national report on the jobs front. The unemployment rate could dip to 5.5 percent from 5.6 percent in April, and the number added to payrolls could hit 225,000 positions. Check the numbers for manufacturing. If the numbers are in the range of 20,000, it's yet another sign of a strong economy.

 
June 7: Consumers continue to add to their credit-card balances at the rate of more than $6 billion a month. It all works as long as interest rates remain at historic lows.

June 11: The "other" deficit that needs attention is the trade deficit. Look for the difference between imports and exports to total almost $45 billion for April, as imports continue to pour into U.S. markets. Exports should start to show some strength.

June 14: Slow times for retail sales, so look for a flat retail report.

June 15: Inflation watch. The Consumer Price Index was surprisingly tame in April, rising only 0.2 percent. But with gas prices soaring and energy bills rising, look for a significant shift upward in the index for May — with more to come.

June 16: Housing starts continue to hold up. How long can this last? In other reports, industrial production and factory use will provide an up-close look at manufacturing.

Check factory use to see if the recent trend continues of more factories resuming production. That's a good signal of a rising economy.

June 25: Consumer-confidence numbers have been weak, one of the few negatives on the economic front. The markets will pay attention to the University of Michigan figures.

June 30: Drumroll, please. The Federal Reserve Open Market Committee meets for a two-day review of the economy. Speculation is growing that the Fed will use the meeting to begin a gradual rise in interest rates. The first step would be to raise short-term rates 0.25 percentage point to 1.25 percent.

Stephen H. Dunphy's phone: 206-464-2365. Fax: 206-382-8879. E-mail: sdunphy@seattletimes.com. More columns at www.seattletimes.com/columnists