Manufacturing Still Grows -- But More Slowly

By John S. McClenahen For the third consecutive month, the manufacturing sector of the U.S. economy grew in September, but it did so more slowly than in August. The closely watched index of manufacturing activity compiled by the Institute for Supply Management (ISM), Tempe, Ariz., was 53.7% last month, a full percentage point less than its 54.7% mark in August. A figure above 50% means the manufacturing economy generally is expanding; a number below 50% signals contraction. Among key components of the index, new orders grew faster in September than in August (60.4% vs. 59.6%) while production grew more slowly (57.3% vs. 61.6%). "All in all, [the] report confirms our view that while growth is positive, the economy is entering [the fourth quarter of 2003] on a more moderate path than the consensus had been predicting," says David A. Rosenberg, chief North American economist at Merrill Lynch & Co., New York. In contrast, Maury Harris, chief economist at UBS Investment Research, also in New York, says, "We believe the still-solid level of the index remains consistent with good economic growth . . . . It offers no reason to alter our forecast that GDP growth accelerated to a 4.5% pace in [the third quarter]. We expect a still-solid 3.5% pace [in the fourth quarter]." As ISM was releasing its September manufacturing index on Oct. 1, the U.S. Commerce Department was reporting that private and public construction in August was at a seasonally adjusted annual rate of $882.7 billion, 0.2% higher than the revised July figure of $880.8 billion. August's gain was in line with levels that economists generally expected.

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