- The Washington Times - Monday, November 1, 2004

NEW YORK (AP) — Consumer spending rebounded in September while manufacturing activity expanded in October, though at a slower pace than the previous month, providing further evidence of moderate economic growth on the eve of the presidential election.

Overall, those and other reports released yesterday painted a picture of an economy that was still expanding but not as fast as in the summer. Manufacturers said they were concerned about higher prices for energy and commodities, which were eroding profits.

Given the somewhat mixed reading, the reports gave little new information to voters trying to make up their minds about how the economy has been faring under President Bush, said Ethan Harris, the chief U.S. economist at the Lehman Bros. investment bank.

“Right or wrong, the incumbent gets credit or blame for the economy,” Mr. Harris said. “But the economy isn’t breaking clearly for either candidate. It’s a healthy economy, but the labor market remains in slow growth mode, and growth is moderating. … I don’t think the data are tipping the balance one way or the other.”

The Institute for Supply Management reported that its index for manufacturing activity continued to indicate growth in October, though at a slower pace than in September and marking the 17th consecutive month of expansion.

The index came in below the reading of 58.5 recorded in September and below expectations at 56.8. While the indicator remains well above the level of 50 that indicates growing levels of manufacturing activity, the index had been above 60 for the first seven months of the year, suggesting that growth has been moderating.

“October continued a trend of slower growth, but that should be somewhat expected as manufacturing has experienced three quarters of strong growth so far this year,” said Norbert J. Ore, chairman of ISM’s manufacturing survey committee.

The ISM also noted there is “significant upward pressure” on prices for manufacturers, and that in particular higher prices for energy and commodities were “major concerns” for buyers of manufacturing supplies.

Separately, the Commerce Department reported that spending by consumers expanded at a robust rate of 0.6 percent in September, despite a modest uptick of 0.2 percent in personal income, as purchases of big-ticket items such as cars soared.

Consumer spending is closely watched by economists because it makes up two-thirds of economic activity.

However, Mr. Harris said one key reason the September number was higher was that automakers brought back aggressive incentives for car buyers because they were “desperate” to clear out mounting inventories.

Spending by consumers had been bumpy in recent months, falling 0.1 percent in August and rising 1.2 percent in July.

Growth in personal income was much more moderate, rising 0.2 percent in September after a 0.3 percent rise in August.

The Commerce Department also reported yesterday that construction spending was essentially flat in September after big gains of 0.9 percent in August and July.

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