WASHINGTON — Hopes for the fledgling U.S. 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 U.S. 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 U.S. 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 U.S. government’s US$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.
“It clearly looks like we are seeing a turnaround in the manufacturing sector,” said David Wyss, chief economist at Standard&Poor’s in New York.
Economists cautioned 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.