Factory, Building Data Hint at Growth
Upbeat reports on the U.S. manufacturing and building sectors Monday suggested that the tempo of economic growth is likely to improve this quarter, though employment still is lagging.
The Institute for Supply Management index of manufacturing activity came in at 53.9 in January, just above expectations of 53.7. That was slightly slower than December’s brisk 55.2 pace but represents the second month above the 50.0 barrier that separates expansion from contraction.
Meanwhile, a strong 2.9% jump in home building in December suggested that the economy actually did a little better last quarter than first indications suggested.
The improvement in output appeared to be more than just transitory, with the ISM index for new orders holding at lofty levels and export orders rising, perhaps a tentative sign that the weakness of the dollar is making American goods more attractive abroad.
“The data show manufacturing is holding its own, and that means the U.S. is probably not going into another recession,” said Ram Bhagavatula, chief economist at Royal Bank of Scotland Financial Markets in New York.
Still, industry seems to be meeting the pickup in orders and production by squeezing more out of existing resources. The ISM’s index of employment lapsed to 47.6 in January from an already subdued 48.2 in December, the 28th straight month below the 50.0 mark.
Overall, the reports reinforce analysts’ expectations that the economy will grow at a decent 2% to 3% clip this quarter after expanding at a snail’s pace of 0.7% in the fourth quarter of 2002.
Monday’s figures on December construction activity showed just how vital the housing sector has become. Spending on residential construction beat all forecasts, with a 2.9% jump to a record annual rate of $434.6 billion. Overall construction spending, including business construction, rose 1.2% to $858.3 billion.
Government again was a big spender, with a rise of almost 5% for the year. The result was strong enough to suggest that last quarter’s economic growth could be revised upward slightly.
