- The Washington Times - Monday, May 1, 2006

ASSOCIATED PRESS

The nation’s economy carried its strong momentum into the second quarter as factories cranked up activity, builders boosted construction spending to a record high, and consumers opened their pocketbooks ever wider.

But inflation picked up, too.

The information was contained in a trio of economic reports released yesterday.

“Households and corporations are still very active and are creating economic momentum, which is tremendously encouraging news for the economy,” said Carl Tannenbaum, chief economist at LaSalle Bank. “The only dark cloud comes from the news on prices, which are going up.”

A report from the Institute for Supply Management showed manufacturing activity grew briskly last month. The group’s manufacturing index jumped to 57.3 in April, from 55.2 in March, the strongest showing in six months.

The report also showed prices are rising for energy and other commodities, such as aluminum and copper.

“The indicators of prices … are beginning to point more clearly toward inflation pressures,” said Stephen Stanley, chief economist at RBS Greenwich Capital.

Moreover, the sinking value of the U.S. dollar — which fell to a seven-month low against the Japanese yen — also raises inflation concerns. A weaker dollar can increase the price of goods flowing into the United States. That in turn can give U.S. companies more leeway to boost their own prices.

In a second report, the Commerce Department said total construction spending in March climbed to $1.199 trillion, on an annualized basis, surpassing the previous record high set in February. That marked a 0.9 percent increase.

Private builders ramped up spending on a variety of projects in March, including residential construction and factories. The government also spent more on big public works projects, including power plants.

“The construction engine was firing on all cylinders,” said Ken Simonson, chief economist of the Associated General Contractors of America.

In another report from the department, consumer spending rose 0.6 percent in March, an improvement from February’s 0.2 percent increase.

Incomes, the fuel for future spending, advanced 0.8 percent in March. That was up from a 0.3 percent increase in February and was the largest gain since September.

When adjusted for inflation, consumer spending looked more subdued, rising by 0.2 percent in both February and March.

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