Manufacturing Drops in September, Pending Home Sales Rise
A widely watched gauge of U.S. manufacturing activity came in well below expectations in September, the Institute for Supply Manufacturers said moments ago.
The ISM's index of manufacturing activity was 52.6 in September, down from the August number and well below expectations, which forecast the index to be 54.
Also, moments ago, August data on pending home sales and construction spending were released.
Pending home sales in August rose 6.4 percent compared with July, and were up 12.8 percent over August of 2008. It marked the biggest gain since March 2007.
It's important to note that this is a measure of contracts signed, not closings, which actually went down in August. Reason? There have been lengthy delays between contract-signings and closings, partly thanks to new appraisal rules, which are drawing out the closing process.
Construction spending rose 0.8 percent in August, much higher than the 1.1 percent drop in July. The August number beat expectations, which pegged construction spending to drop 0.2 percent.
Overall, this last raft of important economic data due out this morning is a mixed bag, at best. U.S. manufacturing needs to rebound if there is to be a recovery. As for the pending home sales, they were likely goosed by the government's $8,000 first-time home buyer credit, which expires at the end of next month, though the housing industry is lobbying the government to continue it.
The point, however, is that the housing credit -- like the Cash for Clunkers program -- is a Red Bull caffeine surge into a moribund economy. It's quick, but it doesn't last. It is meant to be a bridge out of tough times, but until we can see some organic growth, no recovery can be said to be underway.
-- Frank Ahrens
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October 1, 2009; 10:18 AM ET
Categories: The Ticker | Tags: ISM, construction spending, pending home sales
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