Manufacturing Grows…just slowly
by admin on Dec.25, 2009, under Manufacturing
U.S. manufacturing activity increased for the fourth consecutive month in November, although at a slower rate as the nation fumbles its way toward recovery.
Meanwhile, the housing market showed further signs of strength in October, but nonresidential construction spending declined 1.5%.
The Institute for Supply Management said Tuesday that its index of manufacturing activity fell to 53.6 in November from 55.7 the prior month, although it remained above the key 50 level that indicates expansion. Although the employment and production components within the index slipped, new orders rebounded from an October decline and rose nearly two points to a level of 60.3.
“I didn’t expect new orders to jump up like that so it shows some strength there, which ultimately results in strength in other components,” said Norbert Ore, head of the survey committee.
But he cautioned that companies indicated some hesitance about hiring, and said only 12 of 18 industries surveyed reported overall growth.
Separately Tuesday, the National Association of Realtors said its index of pending home sales, a leading indicator of actual sales, rose for the ninth consecutive month in October to a level of 114.1, its highest since March 2006. The group’s chief economist, Lawrence Yun, credited the government’s tax credit for first-time home buyers with “helping unleash a pent-up demand” for housing.
Both housing and manufacturing activity are important barometers of the U.S. economy’s health, and economists are trying to gauge whether the rebound seen in both areas this year can be sustained without the boost from government stimulus programs.
In October, for example, the ISM manufacturing index rose to 55.7, but new orders of big-ticket durable goods actually slipped during the month, according to Commerce Department data released last week. A key gauge of business spending, nondefense orders for capital goods excluding aircraft, sank 2.9%.
One bright spot: Inventories are shrinking, paving the way for an increase in future orders and production. A third of manufacturing respondents told ISM their customers’ inventory levels were “too low” in November, while only 7% said they were “too high.”
