Economic Watch: Manufacturing and Housing Increase Significantly

Economic activity in the manufacturing sector expanded in August for the third consecutive month and at its best pace in more than two years, raising hopes about the performance of the American economy during the third quarter of the year.

A report released Tuesday by the Institute for Supply Management shows its index of factory activity in the United States rose to 55.7, up from 55.4 the month before. A reading above 50 percent indicates that the manufacturing economy is generally expanding while below 50 percent indicates that it is generally contracting.

New orders also marked their best level in more than two years.

Of the 18 manufacturing industries, 15 reported growth in August.

The group says the past relationship between the index and the overall economy indicates that the average index for January through August of 52.5 corresponds to a 3.2% increase in real gross domestic product on an annualized basis and if the index for August is annualized, it corresponds to a 4.2% increase in real GDP, annually.

Meantime, a separate report, also released on Tuesday, shows total construction spending in the U.S. during July increased to its highest level in four years, according to the U.S. Commerce Department.

Activity clocked in at an annual rate of just over $900 billion, due in great part to a 0.5% increase in residential construction, the sector’s best performance since September 2008, while nonresidential construction spending increased 0.6%.

Total construction in the U.S. during the month was 5.2% higher than the same time in 2012.