Saturday, April 21, 2018

Mixed economic signals: manufacturing up, construction down


Thursday, April 1, 2010
In this photo taken Wednesday, March 31, 2010, construction workers build a planned shopping center in Philadelphia. Builders cut back on new projects at a faster-than-expected pace in February and drove down construction spending to the lowest level in eight years. It was a fresh sign that the troubled real-estate market remains a sore spot for the economic recovery.(Associated Press/MATT ROURKE)
In this photo taken Wednesday, March 31, 2010, construction workers build a planned shopping center in Philadelphia. Builders cut back on new projects at a faster-than-expected pace in February and drove down construction spending to the lowest level in eight years. It was a fresh sign that the troubled real-estate market remains a sore spot for the economic recovery.(Associated Press/MATT ROURKE)

Two economic indicators released today show both sides of the spectrum — manufacturing was up, construction down.

The U.S. manufacturing sector expanded in March at its strongest pace in 5 1/2 years, according to a private trade group, as industrial companies continue to lead the recovery from the recession.

The Institute for Supply Management, a trade group of purchasing executives, said its gauge of industrial companies rose to 59.6 in March from 56.5 in February. It is the eighth straight month of expansion and the fastest growth since July 2004, when the index was 59.9.

But on the flip side, builders cut back on new projects at a faster-than-expected pace in February and drove down construction spending to the lowest level in eight years.

It was a fresh sign that the troubled real-estate market remains a sore spot for the economic recovery.

Both indicators are important to the trucking industry, which hauls manufactured goods, but also relies on construction, especially in the flatbed segment.

The Commerce Department reported Thursday that spending on construction projects around the country fell by 1.3 percent to a seasonally adjusted annual rate of $846.23 billion. That was the lowest level since November 2002.

Economists were predicting builders would pare spending by 1 percent.

Economists polled by Thomson Reuters had expected the manufacturing measure to read 57.

A level above 50 indicates growth.

Factories are boosting production for exports and their customers are slowing the drawdown of their inventories, helping power the economic recovery worldwide.

Manufacturing surveys Thursday in China, Britain and the 16 countries using the euro all showed factory activity surging.

Seventeen of the 18 industries that the ISM surveys reported growth last month, led by the apparel sector. Only makers of plastics and rubber products reported contraction.

New orders, a signal of future production, and existing production also grew faster in March. Manufacturers said their inventories grew after 46 straight months of contraction.

Letting inventories rise is a signal that companies expect factory activity and orders to increase.

The weakness in construction was widespread. Spending fell for home building, commercial ventures, including hotels and motels, and big government public works projects, such as highways and streets.

The 1.3 percent drop, followed a deeper 1.4 percent decline in January. It was the fourth month in a row that construction spending fell.

The housing market led the country into a recession and despite some improvements at the end of last year, the sector this year is showing fresh signs of weakness. Commercial real estate has been a drag on overall economic activity. Soured commercial real estate loans are a problem for banks, which remain wary of boosting lending to consumers and businesses.

Thursday's report suggested that the real-estate market will continue to be a problem spot for the economy, which is recovering from the worst recession since the 1930s.

Total spending on construction projects is down 12.8 percent from a year ago, underscoring the deep hole builders are struggling to emerge from.

When spending by governments is removed, spending by private builders on all types of construction projects dropped in February to a rate of $553.5 billion, the lowest since January 1999.

Private builders cut spending on housing projects in February by 2.1 percent, following a 1 percent increase in January. That pushed spending down to a rate of $250.8 billion in February, off 3.8 percent from last year.

In February the East Coast was slammed by snowstorms, which contributed to the weak construction spending figures for the month. Even so, most analysts predict a long and bumpy road ahead for builders to get back on firm footing.

 Kevin Jones of The Trucker staff can be reached to comment on this article at kevinj@thetrucker.com.

 

 

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