U.S. economy on the mend
By Alia McMullen, Financial PostSeptember 1, 2009
The U.S. manufacturing sector grew in August in the first month of expansion in more than a year and a half.Photograph by: Jay LaPrete/Bloomberg News, Jay LaPrete/Bloomberg NewsThe U.S. manufacturing sector grew for the first time in a year and a half in August, while residential construction spending and pending home sales also improved, confirming the world’s largest economy is on the mend. While the recession has likely ended, the early days of growth are scattered and not yet strong enough to create jobs, leaving consumers in the dumps and markets wary ahead of this week’s employment figures.
“The good news is that the recovery in the manufacturing and housing sectors appears to be gathering pace,” said Paul Dales, a U.S. economist at Capital Economics.
The Institute For Supply Management’s manufacturing index rose for an eighth straight month in August, however it was the first time since January last year that the indicator moved above the crucial 50-level, which separates growth from contraction. The index increased four points to 52.9 -- the highest level since June 2007. The rise in activity is a far cry from the 28-year low of 32.9 recorded in December.
Manufacturing activity around the globe also improved in August with the JP Morgan Global Purchasing Managers Index expanding for the first time since May, 2008. Activity in China hit a 16 month-high, while in Japan, the manufacturing sector was growing at its best pace in three years.
The key driver of U.S. manufacturing in the month was a 9.6 point jump in the new orders sub index to a four and a half year high of 64.9, indicating a rise in demand for manufactured goods. Production was also strong in response to the new orders, helped by the government’s “Cash for Clunkers” car stimulus program as well as improvements in residential construction as a result of the homebuyers tax credit.
Separate figures showed Tuesday that vehicle sales surged 23% in August from the previous month, while residential construction jumped 7% in July for its first monthly increase in 40 months.
