Posted on 12/02/2003 5:59:34 AM PST by Arrowhead1952
Recent growth in manufacturing and construction boosts economic outlook
ASSOCIATED PRESS
Tuesday, December 2, 2003
A pair of upbeat reports Monday reinforced rising optimism about the nation's economic recovery: The manufacturing sector expanded in November for a fifth consecutive month and at its fastest rate in nearly two decades, and October's construction spending was the best on record.
More important, surveyed manufacturers showed a general readiness to hire people after three years of cutting back on factory payrolls.
"We're clearly coming out of the woods," Sung Won Sohn, chief economist at Wells Fargo in Minneapolis, said Monday.
The Institute for Supply Management reported that its manufacturing index soared last month to its highest level since December 1983. The index registered at 62.8, a large increase from the October reading of 57 and well above analysts' expectations of 58.1.
An index reading above 50 indicates expansion; one below 50 indicates that manufacturing activity is contracting.
Economists said the most encouraging detail in the manufacturing report was an employment increase.
"If factory employment is starting to improve -- and that has been one of the toughest nuts to crack -- then we are likely to see growth across all sectors," said Douglas Porter, senior economist at Nesbitt Burns Securities of Chicago. "That is truly an encouraging result."
The Austin purchasing managers index for November hasn't been released yet, but the local index has been rising steadily since May and hit a new high of 71.7 in October. The employment component of the index also has been on the rise, although that trend has yet to show up in overall job growth. The rate of job creation slipped back last month to less than 1 percent after several stronger months.
Local companies that are hiring are doing so a handful or a few dozen at a time.
President Bush hailed Monday's manufacturing report as evidence that his administration's tax cut was helping to improve the finances of Americans as well as the economy at large.
"With all these actions, we are laying the foundation for greater prosperity and more jobs across America so every single citizen has a chance to realize the American dream," Bush told donors at a fund-raiser in Dearborn, Mich.
Also on Monday, the Commerce Department reported that the total value of building projects under way came in at a seasonally adjusted $922 billion in October, a 0.9 percent increase from the previous month.
The $922 billion level was an all-time monthly high, and the percentage change from the previous month was even better than the 0.6 percent rise that analysts were forecasting.
The strength in construction was fairly broad-based, with spending by private builders on residential construction and spending by government on big public works projects each posting the highest monthly level on record.
On Wall Street, investors were encouraged by the manufacturing and construction data. The Dow Jones industrial average closed up 116.59 points at 9,899.05, while the Nasdaq composite index closed at its highest point in nearly two years, up 29.56 points at 1,989.82.
The manufacturing index, which economists view as a particularly important indicator of the economy's direction, provided evidence that the three-year depression in manufacturing finally was drawing to a close.
U.S. manufacturers have shed more than 2 million jobs since the fall of 2001, with many of the lost jobs in politically important swing states such as Pennsylvania, Ohio and Missouri.
The job market already had begun to improve modestly in August and September, but that rebound had been in service industries, and the new survey provided the first evidence that manufacturers finally were poised to start hiring as well.
Economists now are fixing their attention on the next crucial piece of economic news: the Labor Department's monthly report on unemployment, which is to be released on Friday.
Forecasters are predicting that the government will report an increase of about 125,000 jobs in November, about in line with the job growth in the previous two months. Though this would be a significant turnaround from the steady stream of net job losses before this fall, the economy needs to generate more than 200,000 jobs a month before the unemployment rate will begin to drop significantly.
The new survey of manufacturing activity came on the heels of other reports showing that the economy increased at a robust annual rate of 8.2 percent in the third quarter of this year and that the job market finally had begun to revive.
Economists said the new data provided strong evidence that economic growth would continue to be strong next year, long after the kick wore off from this year's tax cuts and the Federal Reserve's most recent reduction in interest rates.
This article contains material from other wire services.
Let me be the first to say it, Tom Dashole is very saddened.
I am witnessing increased economic activity here in the Boston area. Stores and restaurants are jammed. One informal index I like to use is the "Christmas Light" index. That is, how many people decorate their homes this time of year with Christmas lights. The last few years, there have not been as many Christmas lights hung as in years past. This year, the neighborhoods around here are already more brightly lit than at any time last year. I like to take walks through my neighborhood after dinner this time of year to see all the displays and they are definitely very impressive this year - despite that the coming weekend is the traditional weekend for most people to hang their lights. In fact, I've added at least a dozen more strings of lights to my display this year from last year and I might even get some lighted reindeer for the lawn this weekend and a plastic lighted Santa Claus. Ho Ho Ho!
Amen to your comment on doom and gloomers haunting FR!!! Actually, I think it's an element that want to appear "wise" on a "safe" basis. If the economy/markets rise and lift all boats... everybody's happy and forgets all the negative commentary. If the opposite happens... then they can swagger around here reminding everyone how clairvoint they were. Small minds looking for a following!!!
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