- The Washington Times - Wednesday, September 1, 2004

Construction spending in July reached a record high, the Commerce Department reported yesterday.

Separately, manufacturing activity rose in August, but at a slower rate than in July, according to a monthly report released yesterday by the research group Institute for Supply Management.

Together, the reports indicate economic expansion is continuing despite lingering concerns over slower job growth and declining consumer confidence.

“Both of these reports are positive for the economy,” said John Silvia, chief economist at Wachovia Corp., in Charlotte, N.C.

The manufacturing index prepared by the Institute for Supply Management was 59 percent in August, three percentage points below July’s rate of 62 percent, suggesting that manufacturing activity remains high but has slowed.

Manufacturing is expanding when the ISM’s index exceeds 50. If the index is below 50, manufacturing is contracting.

Overall conditions for U.S. manufacturers remain positive, and new orders and production levels are high, said Norbert Ore, director of the monthly report by the ISM.

“August was another good month for the manufacturing sector,” Mr. Ore said.

But the ISM report also found that manufacturers have some concerns, including rising energy costs and higher prices for materials such as steel.

The ISM report is based on responses from more than 400 companies in 20 industries.

The Commerce Department report found that U.S. construction spending rose 0.4 percent in July to an annual rate of $997.2 billion, a new high.

Housing construction fueled the increase, and private, residential construction accounted for $537.5 billion in spending. That also was a record.

Mr. Silvia said that nonresidential construction also surged.

“You are seeing that sector coming on,” he said.

Private, nonresidential building rose 0.8 percent to $220.8 billion. Construction of office buildings fell 2.5 percent to $31.4 billion. Spending on factories and related buildings rose 8.7 percent to $14.1 billion.

Favorable weather conditions and lower mortgage rates contributed to the construction increase in July. The data suggest that construction will continue to support economic growth in the third quarter.

Corporate executives yesterday said they are more optimistic about the economy now than they have been in two years. Some anticipate higher sales and an increase in hiring through this year and into 2005, according to a survey by the industry lobbying group Business Roundtable.

America’s chief executives believe that the U.S. economy is healthy, and they predict steady growth in capital spending, sales and employment, said Hank McKinnell, chairman and chief executive officer of Pfizer Inc. and chairman of Business Roundtable.

“The survey points to a continuation of the economy’s rebound,” Mr. McKinnell said.

Most executives said they won’t add workers in the next six months. Forty percent of the executives predicted that hiring will rise during the next six months, but 48 percent said they won’t change their payrolls, and 12 percent said they will reduce them.

The Labor Department may report as soon as tomorrow that 150,000 jobs were created in August after just 32,000 jobs were created in July.

Business Roundtable’s survey came a day after the New York-based Conference Board, an economic research group, reported that consumer confidence in the economy fell in August as job growth slowed.

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