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Wed July 10, 2002 - National Edition
Manufacturing — down since last year’s recession — turned in its strongest performance in nearly 2 years in June, but spending on construction dipped to a five-month low the month before.
This latest snapshot of the economy suggested the recovery remains on track but improvements are spotty, economists said.
The Institute for Supply Management’s (ISM) manufacturing index jumped to 56.2 in June, the highest level since February 2000, and up from a reading of 55.7 in May. An index above 50 signifies growth in manufacturing, while a figure below 50 shows contraction. It marked the fifth month in a row that manufacturing expanded.
That’s good news for the national economy and for manufacturing, an industry that throttled back production during the slump and saw hundreds of thousands of jobs evaporate.
ISM’s manufacturing index in June was stronger than the 55.5 reading many analysts were forecasting.
But construction spending turned out to be weaker than expected. The value of all construction projects dropped 0.7 percent in May to a seasonally adjusted annual rate of $852 billion, the lowest level since December, the Commerce Department said. Many analysts were predicting a 0.3 percent increase. The decline followed a 0.4 percent rise in construction spending in April.
May’s performance largely reflected a 3.1 percent drop in private builders’ spending on commercial projects, such as office buildings and industrial complexes, which fell to a rate of $173 billion. Spending on residential projects held steady.
Through the slump, the residential side of construction market powered ahead as low mortgage rates motivated home buyers.
However, the commercial side has been turning in lackluster performances as businesses cut investment in new plants and buildings. They probably won’t step up such investment until they feel more assured about the recovery, economists said.
Nonetheless, economists were encouraged to see the ISM’s production index, a gauge of current output, rise to 61.4 in June, the strongest showing in three years.