Construction spending in September posted its best month on record, and manufacturing output in October reached its highest level in nearly four years, signs that bode well for the economy’s resurgence.
The Institute for Supply Management said Monday that its manufacturing index jumped to 57.0, the highest reading since January 2000, from 53.7 in September.
It was the fourth month in a row that the index finished above 50, which signifies expansion. A figure below it denotes contraction.
“Manufacturing has definitely made a turn and is in a recovery phase,” said Paul Kasriel, head of economic research at Northern Trust in Chicago.
Factories boosted production to replenish depleted stocks after tax cuts and business tax incentives helped sales surge at a 7.8 percent annual pace during the third quarter, the most since 1978.
Businesses cut inventories at an annualized pace of $35.8 billion in the third quarter, the most since the fourth quarter of 2001 and the second consecutive drop. Inventories of automobiles, furniture and other durable goods dropped to 1.44 months’ supply in September, the lowest on record.
The new-orders component of the index, a key source of future activity, rose to 64.3, its highest level since June 1994, from 60.4 in September. The production index, a gauge of work being performed, rose to 62.6, its best since July 1997.
There was good news in the employment component of the index, as well. It showed the pace of layoffs slowing, rising to 47.7, the highest level since December 2002, from 45.7.
In a second report, the Commerce Department said construction spending in September rose 1.3 percent from August, to a seasonally adjusted annual rate of $910.6 billion, a monthly record.
Spending by private builders on housing projects rose 1.4 percent, to a rate of $471.4 billion, also a monthly record.
Kasriel said the improvement in growth abroad and corporate profits will help make this rebound the one that likely will leave the 2001 recession and long jobless recovery behind.
“Both of those were missing ingredients,” he said. “Without profits and the prospect thereof, businesses don’t invest. Without profits, businesses don’t hire people.”
