Economy contracts, but at a slower pace

Most analysts think a recovery is still months away.
By MARTIN CRUTSINGER
The Associated Press
WASHINGTON – New economic reports on construction spending, manufacturing and pending home sales suggest the recession may be moving closer to a bottom.
But most analysts think the low point is still months away, with more bad news likely before the economy stabilizes and begins to rebound.
The Commerce Department reported Wednesday that construction spending dropped 0.9 percent in February, the fifth straight monthly decline but less than the expected 1.5 percent decrease.
The Institute for Supply Management said its manufacturing index rose to 36.3 last month from 35.8 in February. Even with the small increase, the index is stuck well below the reading of 50 that is the dividing line between growth and recession. The index hit a 28-year low of 32.9 in December.
“Manufacturing is still totally in the dumps, but it doesn’t seem to be sinking further,” said Joel Naroff, chief economist at Naroff Economic Advisors.
The 0.9 percent fall in construction spending was led by a 4.3 percent drop in housing. That pushed housing construction to the lowest level in 11 years. Home builders have cut back sharply, but they face a rising glut of unsold homes as record mortgage foreclosures dump more properties on the market.
The manufacturing report, based on a poll of the Tempe, Ariz.-based trade group of purchasing executives, covers indicators including new orders, production, employment, inventories and prices.
Inventories will need at least three more months to fall to healthy levels. When that happens, new orders could rebound “and then it’s a number of months before you see any improvement in employment,” said Norbert Ore, chair of the ISM manufacturing survey committee.
“It’s going to be long, and it’s going to be slow,” Ore said.
The Commerce Department report showed nonresidential construction rose 0.3 percent in February. That was a slight rebound after a 4.3 percent drop in January that had been the biggest decline in 15 years.
None of the 18 manufacturing industries grew in March, and new jobs are unlikely before next year.

 

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