Construction shows growth nationwide

USA Today

There were fresh signs yesterday that the battered factory sector may have bottomed out in January and that construction continues to surge, defying the general economic slowdown.

Low mortgage rates have been helping to keep construction healthier than other parts of the economy for months, and February was proof the trend continues. Construction spending rose 0.6 percent over January.

At the same time, the closely watched National Association of Purchasing Management's (NAPM) monthly gauge of manufacturing activity showed further signs of life in March, contradicting predictions that it would fall.

The NAPM index rose to 43.1 in March from 41.9 in February and 41.2 in January. Since any reading below 50 indicates that the factory sector is contracting, that's not unalloyed good news. But March marked the second month in a row when the rate of decline slowed, signaling that the factory sector could resume expanding by this summer or fall.

While many analysts say the overall economy remains weak enough to justify further interest rate cuts when the Federal Reserve meets again on May 15, hints that things might be getting marginally better reduce the odds of a quick, inter-meeting rate cut.

Fed officials have signaled that they don't want to make such a cut "unless some surprising new signs of distress appear," said David Orr, chief economist for First Union. He said the NAPM report "is not it."