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WASHINGTON – Hopes for the fledgling economic recovery got a boost Monday from better-than-expected news on manufacturing, construction and contracts to buy homes.
The surprisingly strong readings provided some comfort that the economy is packing more momentum than assumed going into the end of the year. Still, with jobs scarce, lending tight and consumers wary of spending, it’s unclear whether the gains can be sustained as government stimulus programs wind down.
The Institute for Supply Management’s gauge of manufacturing activity grew in October at the fastest pace in more than three years. It was driven by businesses’ replenishing of stockpiles, higher demand for American exports and support from the government’s $787 billion stimulus program.
The ISM index shot up to 55.7 in October, the third straight reading above 50, which signals growth in the sector. It was the highest level since April 2006.
Some economists cautioned that the manufacturing pattern seen in the past two post-recession recoveries likely will be repeated this time: In each case, early strength in manufacturing, led by companies’ restocking of inventories, faded within a few months.
The overall economy, as measured by the gross domestic product, expanded at a 3.5 percent rate in the July-September quarter. That number provided compelling evidence that the longest recession since the 1930s was ending.
Some economists are forecasting that GDP growth could come in around 3 percent in the current quarter. They pointed to the government report Monday that construction spending rose a bigger-than-expected a 0.8 percent in September, fueled by the strongest jump in home construction in six years.
In a third report, the National Association of Realtors said the volume of signed contracts to buy previously occupied homes rose 6.1 percent in September to a reading of 110.1. That’s the highest level since December 2006. And it’s more than 21 percent above a year ago.
