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Economy up slightly but threats remain, reports show

WASHINGTON — The nation's economy is managing to grow modestly, reports showed Monday, despite high U.S. unemployment and growing alarm about Europe's debt crisis.

Manufacturing expanded in September more than in August, though the pace of growth remains weak, according to a survey by the Institute for Supply Management, which said its manufacturing index rose for the first time in three months.

And construction spending increased in August, the government said. The gain was due mostly to a pickup in state and local government projects.

In addition, U.S. auto sales rose in September, largely because consumers bought more pickups and SUVs, U.S. automakers said.

Collectively, the reports suggested that the U.S. economy may be able to avoid another recession but will continue to struggle.

Economists said the manufacturing and construction reports are consistent with an annual growth rate of about 2 percent to 2.5 percent for the July-September quarter.

That would be an improvement from growth of about 0.9 percent in the first six months of the year. But it wouldn't be enough to reduce the unemployment rate, which is 9.1 percent.

The reports are "mildly encouraging," said Paul Ashworth, chief U.S. economist at Capital Economics. "But even if the U.S. avoids a recession, economic growth is going to remain lackluster."

One sign that it will came from the manufacturing report. Manufacturing executives said their volume of U.S. orders shrank for the third straight month. That doesn't bode well for future production.

Export orders did grow at a faster pace last month than in August, the report found. But some reports Monday suggested that the global economy is slowing. A purchasing managers' report for the 17 countries that use the euro showed manufacturing is contracting in that region.

A clearer reading of the economy will come Friday, when the government will issue the jobs report for September. Economists think employers added from 50,000 to 100,000 net jobs last month.

That's not enough even to keep up with population growth. And the unemployment rate is expected to remain at 9.1 percent for a third straight month.

Factories added workers last month, according to the report from the ISM, a trade group of purchasing executives.

But manufacturing accounts for only about 11 percent of the economy and can do only so much to support the recovery. And manufacturing has slowed in the past several months as consumer spending has weakened in response to high unemployment and stagnant wages. High gas and food prices are also forcing shoppers to cut back in other areas.

The report follows other indicators that show the economy is sputtering, though still growing. Companies ordered more machinery, computers and other equipment in August, a government report last week showed.

Construction spending rose 1.4 percent in August, the Commerce Department said. The increase followed a 1.4 percent drop in July, which had been the biggest setback in six months.

Analysts noted that much of the increase stemmed from a jump in spending on government projects, such as roads and schools. But with many states and cities short of cash, gains of that size aren't expected to continue.

Economy up slightly but threats remain, reports show 10/03/11 [Last modified: Monday, October 3, 2011 10:08pm]
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