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10/2/2003

Economy looks encouraging

The Associated Press

WASHINGTON — Manufacturing flashed another growth signal in September and construction spending climbed in August to the highest level in seven months, a double dose of encouraging news for the economy and Wall Street investors.

The Institute for Supply Management reported Wednesday that for the third month in a row activity at America’s factories expanded. The research group’s manufacturing index was 53.7 in September, compared with 54.7 in August.

An index reading above 50 indicates expansion; one below 50 indicates that manufacturing activity is contracting. From March through June, the manufacturing index was below 50.

Jerry Jasinowski, president of the National Association of Manufacturers, called September’s index reading “a strong indicator that manufacturing is gaining momentum.”

In a second report, the Commerce Department said the total value of building projects under way came in at a seasonally adjusted annual rate of $882.7 billion in August — the strongest showing since January — and a 0.2 percent increase from July.

Contributing to August’s increase were spending on housing by private builders and spending by the government on public works projects. Each had its best month on record. Those gains blunted losses elsewhere.

“Housing continued to streak ahead, public construction rebounded but private nonresidential construction slipped again,” said Ken Simonson, chief economist at Associated General Contractors of America.

On Wall Street, the Dow Jones industrials soared Wednesday by 194.14 points — its biggest point gain since the middle of June — to close at 9,469.20.

Although economists were calling for a stronger, 54.8 reading on the manufacturing index for September and for a larger, 0.4 percent increase in construction spending in August, they were nonetheless heartened that each report pointed to the recovery taking a step forward, rather than a step back.

“It is promising that we are still in expansionary territory,” said Richard Yamarone, economist with Argus Research Corp.

Amid signs of an economic resurgence, the Federal Reserve last month decided to hold a main short-term interest rate at 1 percent, a 45-year low.

Economists believe the Fed probably will leave that rate unchanged at its next meeting on Oct. 28.

The economy grew at a 3.3 percent rate in the second quarter of this year, and economists are predicting that it is now gaining even more momentum.

Many analysts believe the economy is growing at a rate of over 5 percent in the current quarter and should be able to maintain growth above 4 percent in the final three months of the year.