NEXT UP-Balance of regional data hints at resurgent US ISM

By Ros Krasny

CHICAGO, May 29 (Reuters) - Mostly pleasant surprises in U.S. regional factory surveys for May suggest the national picture is improving also, reinforcing the view that the economy is ready to break out of recession by year-end.

The Institute for Supply Management's national factory report for May is due on Monday at 10 a.m. EDT, and the purchasing managers index is forecast to rise to 42.5 from 40.1 in April.

If the index rise turns out to be as forecast, it would be the at its highest since since September last year, and up from the low of 32.9 hit in December.

"Survey data have shown a slowing in the pace of manufacturing decline, and the forward-looking components indicate the sector may be close to a bottom," said Nicholas Tenev, economist at Barclays Capital.

Barclays tentatively looks for the ISM index to climb back above the 50 level, which separates contraction from expansion, by late 2009.

"Once it begins to bottom, the manufacturing sector tends to turn quickly," Tenev said. "In past recessions, the ISM manufacturing index has jumped an average of 12.9 index points over three months once it recovers to at least 40, as it did in April."

A string of manufacturing indices from regional Federal Reserve banks -- New York, Philadelphia, Dallas, Richmond and Kansas City -- all rose in May.

Meanwhile, the regional purchasing managers surveys -- many of which also have a strong manufacturing component -- were also mostly strong.