U.S. factory, construction data bolster growth prospects

Tue Mar 1, 2016 4:08pm EST
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By Lucia Mutikani

WASHINGTON (Reuters) - U.S. manufacturing appeared to stabilize in February, with production accelerating and new orders holding steady at higher levels, in another dose of good news for the economy after growth slowed in the fourth quarter.

The economic outlook was further bolstered by another report on Tuesday showing construction spending scaling a more than eight-year high in January. Though automobile sales slowed a bit in February, they remained at levels consistent with strong consumer spending.

The reports added to upbeat data on consumer spending, the labor market, industrial production and durable goods orders in suggesting that economic growth picked up at the start of the first quarter, which should further ease fears of a recession.

"To be clear, none of this data are at levels suggesting a boom, far from it, but neither do they support the notion of an economy slipping into recession," said Steve Blitz, chief economist at ITG Investment Research in New York.

The Institute for Supply Management (ISM) said its index of national factory activity increased 1.3 percentage points to a reading of 49.5 last month, the highest reading since September.

A reading below 50 indicates a contraction in manufacturing, which accounts for 12 percent of the U.S. economy. While it was the fifth straight month the ISM index was below 50, it was also the second consecutive month that it has risen.

A strong dollar, weak global demand and spending cuts by energy firms following a plunge in crude oil prices have undercut manufacturing. Ongoing efforts by businesses to sell unwanted inventory have also been a drag on factory activity.

The ISM survey was the latest indication that the worst of the manufacturing downturn was probably over. Reports last month showed solid increases in industrial production and new orders for long-lasting U.S.-manufactured goods.   Continued...

The One World Trade Center tower and Seven World Trade Center (R) are seen towering over lower Manhattan in New York May 2, 2014. REUTERS/Brendan McDermid