WASHINGTON -- Two reports issued yesterday on the manufacturing and construction industries signaled that the U.S. economy is continuing to move forward at a slow pace, analysts said.
The index of the National Association of Purchasing Management for October climbed back to 50.6% from 49.0% in September as manufacturers reported a pickup in new orders.
A reading above 50% on the association's survey of over 300 firms generally means the manufacturing sector is expanding, while a reading below 50% signals contraction.
Separately, the Commerce Department reported that construction spending in September advanced 1.3% to a seasonally adjusted annual rate of $428.5 billion, with increases in both private and public buildings.
However, the increase followed a revised downturn of 1.1% in August outlays by builders, slightly greater than the 0.8% decrease reported last month.
"Our general view is that the economy is still continuing to struggle," said Paul Boltz, financial economist for T. Rowe Price Associates Inc. in Baltimore. "We've achieved moderate growth of 2.4% so far this year, but it still doesn't feel like a recovery because all we've done is move back up to our trend rate of growth instead of experiencing any surge."
"Things are improving, but very, very slowly," Boltz added. "That's why everybody feels kind of blue about the economy."
The increase in the purchasing managers index followed a sharp drop in September, to 49.0 from 53.7, that provoked renewed worries about the industrial sector and the general economy.
Joan Schneider, senior domestic economist for Continental Bank in Chicago, called the drop in the September index an aberration from the readings in the 50s that date back to February. "I think we're basically seeing lackluster manufacturing activity. The economy's continuing to creep forward," she said.
Besides new orders, the rise in the October index came on new export orders and an increase in production that purchasing management officials said would be consistent with a rise in the Federal Reserve Board's industrial production index. The Fed's index is due for release Nov. 17.
However, employers continued to trim payrolls despite the gains in orders and production. The purchasing manager's employment index fell from 45.2% to 44.8%, the lowest level since April 1992. Only two industries, apparel and fabricated metals, reported growth in payrolls.
Boltz said the figures showed manufacturers are continuing to stretch out hours to meet demand for orders rather than add jobs. Industrial firms have also been keeping lean inventories, which the purchasing managers survey said fell again in October.
Following the election, analysts are looking forward to Friday's employment report from the Labor Department to get new bearings on the course of the economy. MMS International, a financial advisory service, has issued a forecast calling for a 43,000 increase in nonfarm payrolls while the unemployment rate edges up to 7.6% from 7.5%.
Analysts at Merrill Lynch & Co. predict an increase of 60,000 in nonfarm payrolls. That would not be enough to prompt an immediate cut in short-term rates by the Fed, "but the prospects for further easing before yearend are still good," the firm said in its latest market letter. "The data overall offer little evidence that the foundation for sustained growth is being established."