The American economy continues to defy a gathering worldwide slowdown as new business for the manufacturing sector in August rose to the highest level in more than a decade.
The Institute for Supply Management's (ISM) index unexpectedly jumped to 59, its best score since March 2011, from July's 57.1 reading, far ahead of all prior estimates in the Reuter's survey of analysts.
Seven of the ten component indexes rose, led by new orders which climbed to 66.7 from 61.2 in July. Production gained to 64.5 from 61.2, the most upbeat since May 2010; order backlogs strengthened to 52.5 from 49.5, export orders rose to 55.0 from 53.0 and inventory went to 52.0 from 48.5. Prices fell to 58.0 from 59.5 and employment slipped slightly to 58.1 from 58.2.
Strong automobile sales have helped propel the resurgence in factory output. Car sales in July were 16.4 million annualized, their second highest level in more than six years, following June's 16.92 million units. August's vehicle purchases will be issued tomorrow.
Construction spending, also released today, rose 1.8 percent in July almost double the 1.0 percent forecast and saw June's 1.8 percent drop halved to -0.9 percent upon revision. The building trades were one of the hardest hit sectors in the recession and the extremely weak recovery in new home construction has inhibited both GDP expansion and wage growth.
Annual housing starts have averaged 931,000 a month for the past two years, just 60 percent of their average for the 25 years prior to 2008, despite the 35 percent U.S. population increase since 1983.
Last week revised GDP figures for the second quarter showed that the U.S. economy expanded at a 4.2 percent annual pace, slightly better than the initial 4.0 estimate after shrinking 2.1 percent in the first three months of the year.
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