- The Washington Times - Wednesday, October 1, 2003

ASSOCIATED PRESS

Manufacturing showed further signs of growth in September and construction spending climbed in August to the highest level in seven months, a double dose of encouraging news for the country’s economic recovery.

The Institute for Supply Management reported yesterday that for the third month in a row activity at America’s factories expanded. The research group’s manufacturing index was 53.7 in September, following a reading of 54.7 in August.

A reading above 50 indicates expansion, while one below 50 indicates that manufacturing activity is contracting. From March through June, the manufacturing index was below 50.

Jerry Jasinowski, president of the National Association of Manufacturers, called September’s index reading “a strong indicator that manufacturing is gaining momentum.”

In a second report, the Commerce Department said the total value of building projects under way came in at a seasonally adjusted rate of $882.7 billion in August — the strongest showing since January — and a 0.2 percent increase from July’s level.

Contributing to August’s increase: spending on housing by private builders and spending by the government on big public-works projects, each posting its best month on record. Those gains blunted losses elsewhere.

“Housing continued to streak ahead, public construction rebounded but private nonresidential construction slipped again,” said Ken Simonson, chief economist at Associated General Contractors of America.

Although economists were calling for a stronger, 54.8 reading on the manufacturing index for September and for a larger, 0.4 percent increase in construction spending in August, they were nonetheless heartened that each report pointed to the recovery taking a step forward, rather than a step back.

“It is promising that we are still in expansionary territory,” said Richard Yamarone, economist with Argus Research Corp.

Amid signs of an economic resurgence, the Federal Reserve last month decided to hold a main short-term interest rate at 1 percent, a 45-year low. Economists believe the Fed probably will leave that rate unchanged at its next meeting on Oct. 28.

The economy grew at a 3.3 percent rate in the second quarter of this year, and economists are predicting that it is now gaining even more momentum.

Many analysts believe the economy is growing at a rate of more than 5 percent in the current quarter and should be able to maintain growth above 4 percent in the final three months of the year.

In the manufacturing report, an index measuring new orders placed to factories rose to 60.4 in September, up sharply from 59.6 in August.

But employment in the sector continues to be a sore spot. An employment index fell to 45.7 in September from 45.9 the previous month. Millions of factory jobs have been lost over the last three years as manufacturers have dealt with hard times at home and abroad and have struggled to compete with a flood of imported goods.

On the construction front, the value of all projects by private builders edged up by 0.1 percent in August to a rate of $665.4 billion.

Private builders trimmed spending on office buildings, health care facilities and some other projects, but they continued to plow money into residential buildings, which accounted for $453.4 billion worth of spending in August, an all-time monthly high.

Spending by the government on public works projects, meanwhile, rose by a solid 0.6 percent in August to a rate of $217.3 billion, also the highest monthly level on record. Stronger spending on public housing, highways and streets, and health care buildings offset weaker spending on schools, transportation projects and recreational facilities.


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