Factory Orders, Construction Gaining Steam, Reports Show : Economy: Building of all kinds picked up, and shipments indicate growth in manufacturing. Both are major employers.
The nation’s manufacturing and construction industries are gathering strength, according to separate reports released Monday.
Cheap credit and new orders boosted the pace of activity, indicating that momentum is building in the economy.
A closely watched report from the National Assn. of Purchasing Managers--one of the earliest measures of last month’s economic performance--jumped to 53.8 from 49.7 in September. It was the first gain since February.
A reading above 50 indicates expansion in manufacturing.
Separately, the Commerce Department said construction of new houses, offices, factories and other projects picked up for a fifth straight month, responding to falling interest rates in September.
Total spending on private and public building climbed 0.8% in September to a seasonally adjusted annual rate of $471.3 billion, following revised increases of 0.5% in August and 1% in July.
Previously, the department said August spending had fallen by 1.1% and July had shown only a 0.1% rise.
It was the best string of increases since construction spending picked up from January through May, 1987, department officials said. Construction industries are big employers, so more building means more jobs.
Analysts who commented on the big upward revisions of the summer’s building rates said the economy probably grew even faster during the July-September quarter than the 2.8% annual rate reported last Friday.
“The ink is barely dry on the GDP report, but these numbers and strong factory shipments from late last week already point to an upward revision from the preliminary 2.8% increase,” said economist Russ Sheldon of Mellon Bank in Pittsburgh.
The rate of expansion in the gross domestic product, or national output, is widely expected to rise to about 4% in the current quarter.
Most of the September gain in construction activity came from a 1.7% rise in spending on single-family houses to a rate of $134 billion. Spending on apartment construction fell to a rate of $10.9 billion from $11.2 billion in August.
The pickup in single-family housing had been anticipated. The Commerce Department previously reported that new-home starts rose 2.8% during September to a seasonally adjusted annual rate of 1.35 million units, after gaining 6.7% in August.
Home building has been rising because mortgage rates are the lowest in more than 20 years.
Purchasing managers, who occupy the economic frontier as buyers of goods needed for production, said the vigor of October’s business upswing surprised them.
“A surge in new orders provided the fuel for significant improvement in the overall economy and a sharp reversal in the manufacturing sector toward healthy growth,” said Robert Bretz, chairman of the National Assn. of Purchasing Management’s Business Survey Committee.
“Moreover, the significant improvement in the backlog of orders suggests continued growth in this final quarter of 1993,” he said.
Government spending on construction projects rose to rate of $129.6 billion in September from $127.4 billion in August. Spending on road and street construction, industrial projects and water filtration plants was also on the rise.
After allowing for inflation, total construction spending rose 0.7% in September to a seasonally adjusted annual rate of $403.3 billion, after a 0.2% gain in August, the department said.
Construction Spending
Billions of dollars, seasonally adjusted: Sept., ‘93: 471.3
Source: U.S. Department of Commerce
