Economic Watch: Newest Measures Generally Positive
December 02, 2013
UPDATED--Total construction spending in the United States hit a four and half year high in October, according to U.S. Commerce Department report released on Monday.
The 0.8% increase from the month before resulted in an annual rate of $908.4 billion, following a 0.3% decline in September, while August was downwardly revised from a 0.6% hike to a 0.1% gain.
Leading the October increase was a near 4% jump in public construction projects, the biggest gain since March 2004.
Total spending on federal construction projects was the strongest since January 2011, while spending on private construction fell 0.5%.
Meantime, a separate report, also released Monday, shows economic activity in the manufacturing sector expanded in November for the sixth consecutive month, and the overall economy grew for the 54th consecutive month, according to the Institute for Supply Management
"The New Orders Index increased in November by 3 percentage points to 63.6% and the Production Index increased by 2 percentage points to 62.8%,” said Bradley J. Holcomb, chair of the Institute for Supply Management Manufacturing Business Survey Committee. “The Employment Index registered 56.5%, an increase of 3.3 percentage points compared to October's reading of 53.2% This reflects the highest reading since April 2012 when the Employment Index registered 56.8%. With 15 of 18 manufacturing industries reporting growth in November relative to October, the positive growth trend characterizing the second half of 2013 is continuing."
The news follows a report from the private research group, The Conference Board, released just before Thanksgiving, showing its Leading Economic Index increased 0.2% in October, following a 0.9% increase in September and a 0.7% increase in August.
“The recent increase in the index supports our forecast that the U.S. economy is poised to grow somewhat faster at 2.3% in 2014 compared to 1.6% in 2013,” said Kathy Bostjancic, director of macroeconomic analysis at The Conference Board. “Within the details, the sub-indexes contributing positively to growth are the financial, housing and manufacturing variables. Restraining growth is the ongoing caution of businesses that continue to keep tight reins on capital expenditures.”
The index is used to measure economic conditions three to six months down the road.
“The US LEI has increased for four consecutive months,” said Ken Goldstein, economist for The Conference Board. “Overall, the data reflect strengthening conditions in the underlying economy. However, headwinds still persist from the labor market, accompanied by business caution and concern about federal budget battles. The biggest challenge to date has been relatively weak consumer demand, which continues to be restrained by weak wage growth and slumping confidence.”
Finally, another report, also released just before Thanksgiving, shows shipments of manufactured durable goods in October increased 0.2%, following a 0.5% rise in September, pushing the level to its highest on record, going back to 1992.
In contrast, new orders for manufactured durable goods in October fell 2%, following two straight monthly increases. Much of the drop was due to a decline in new orders for transportation equipment, falling 5.9%.
“Awash in cash, businesses remain sidelined, hesitant to invest in structures, equipment and certainly additional employees,” said Lindsey Piegza,
managing director and chief economist at the investment firm Sterne Agee. “Heading into the final quarter of the year, this morning's October durable orders report suggests what little momentum was gained at the end of the first half of the year is already losing ground.”
Update adds information from ISM and Piegza analysis.