Manufacturing Picks Up Pace at Quarter’s End

U.S. manufacturing industries bounced back in October from a September lull, a closely watched industry survey indicated Monday, though government reports showed consumers were wary in September and building activity slackened.

Analysts said the three separate indicators implied steady economic growth through year-end, possibly at a moderating pace if consumer spending and exports are trimmed back by concern over volatile stock market prices and by fading Asian markets.

In Washington, the Commerce Department said consumers spent more cautiously in September, putting more into savings in a possible sign the economy will get less of a push in the holiday shopping season from robust shopping than it did in the third quarter that ended Sept. 30.

It was a soft end to a robust quarter and would have been a harbinger of spending restraint even without the recent stock market shock, economists said.

Though not in the latest two months reported, income growth generally has lagged spending, and that means consumers have raided their savings.

“Consumer spending will be increasing . . . but not at the rapid pace we had seen,” said economist Lynn Reaser of Barnett Banks Inc. in Jacksonville, Fla. “It will be a good Christmas but not a spectacular one.”

Analysts are divided over how to evaluate the impact of market turmoil. Economist David Orr of First Union Bank Corp. in Charlotte, N.C., said swings in the Dow Jones average of industrial stocks--both up and down--have served as a leading indicator of surges and slumps in retail sales over the last three years.

The National Assn. of Purchasing Management said its October index of industrial activity climbed back to 56.0 last month after falling to 54.2 in September from an August reading of 56.8. A reading of more than 50 shows industrial growth.

Production, new orders and employment all picked up in October, as did prices.

On Friday, the government reported that gross domestic product--the measure of all goods and services produced in the U.S.--grew at a 3.5% annual rate in the July-September third quarter. The key reason was surging consumer spending, which fuels about two-thirds of national economic activity.

A separate report from the Commerce Department on construction spending during September showed clear signs of slowing. Builders scaled back on both private and public, or government-financed, projects from August.

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Purchasing Managers Index:

Oct.: 56.0

* Source: National Assn. of Purchasing Management