- The Washington Times - Monday, November 3, 2003

NEW YORK (AP) — The nation’s manufacturing sector registered its highest level of activity in nearly four years in October, according to an industry report, suggesting that the solid economic growth of the third quarter is continuing in the fourth.

In another positive sign, construction spending in September posted its best month on record, with spending by private builders also hitting a new high, the government said.

“The U.S. economy has solid momentum” carrying on into the October-December quarter, said Sherry Cooper, chief economist at BMO Nesbitt Burns.

The Institute for Supply Management reported yesterday that its manufacturing index rose to 57 last month from 53.7 in September.

It was the fourth consecutive monthly gain and pushed the index to its highest level since January 2000, when it last registered 57. The October reading was well above the 55.5 that analysts had expected.

An index reading higher than 50 indicates expansion; one lower than 50 indicates that manufacturing activity is contracting. From March through June, the index was lower than 50.

Mark Vitner, senior economist at Wachovia Securities in Charlotte, N.C., said the index advance suggests that the economy will show sound growth in the current quarter after expanding 7.2 percent in the third — the fastest pace in nearly two decades.

“This is the first hard evidence we have on the fourth quarter, and it suggests that a lot of the strength of the third quarter is carrying over,” Mr. Vitner said. He predicted fourth-quarter growth in a range of 3.5 percent to 4 percent.

In Washington, the Commerce Department said the total value of building projects under way came in at a seasonally adjusted annual rate of $910.6 billion in September, a 1.3 percent rise from the previous month. The latest reading was an all-time monthly high, and the 1.3 percent increase exceeded analysts’ expectations for an advance of about 0.4 percent.

Spending by private builders on housing projects rose 1.4 percent in September to a rate of $471.4 billion, the highest monthly level on record, the department said.

The housing market has been one of the economy’s important sources of strength and is likely to remain so as interest rates remain subdued.

The Institute for Supply Management’s index is watched closely each month because it is the first major measure of the previous month’s economic activity to be released.

Norbert J. Ore, chairman of the institute’s manufacturing business survey committee, said new orders continued to lead the manufacturing recovery.

Production made “a sharp swing upward during October,” signifying growth for the sixth consecutive month, he said.

Still, manufacturing employment continued to be weak, suggesting that factories still haven’t absorbed excess capacity to the point where they are comfortable hiring.

The employment index registered 47.7 in October, up from 45.7 in September but still lower than the 50 that would signify growth. The report said it was the 37th consecutive month that the index reading was lower than 50.

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