US output growth in October fastest in 4 years

  • Business
  • Wednesday, 05 Nov 2003

NEW YORK: US manufacturers cranked up output in October to the fastest pace in nearly four years, according to a report on Monday that showed hard-hit factories enjoying their best rebound since the 2001 recession. 

Separate government data showed construction spending hit record highs in September, suggesting that overall third-quarter growth, which came in at the strongest pace in two decades, could be revised even higher. 

Car and truck sales ran a little below forecasts in October after near record gains in recent months, showing that retail sales will likely cool heading into the end of the year after the big consumer spending splurge in the third quarter. 

Still, most economists believe the recent burst of economic activity should maintain momentum going forward and spur job gains perhaps putting the final pieces in place for a full-fledged expansion. 

“Employment is in the process of turning,” said Jade Zelnik, chief economist at RBS Greenwich Capital. 

The Institute for Supply Management said its October purchasing managers' index jumped to 57.0, the highest since January 2000, from 53.7 in September, beating forecasts. Any reading above 50 points to growth in the sector, which makes up less than a fifth of the overall economy. 

Many of the ISM survey's components pointed to strong growth going forward. New orders poured in at the quickest pace in four years, rising to 64.3 in October, compared with 60.4 the prior month. 

Factories have suffered the most in the recession and stumbling recovery, losing more than 2.5 million jobs. Those layoffs have made manufacturers' complaints blaming China's currency policy for worsening their problems a hot political issue heading into next year's US presidential election. 

Despite the recent burst of growth, the economy remains plagued by plenty of excess production capacity and job losses following the 1990s boom. Federal Reserve officials have pledged to keep the Fed's target rate at a 45-year low of 1% until that extra capacity is soaked up. 

“We are currently operating below potential. It will be some time before that output gap closes,” Federal Reserve Bank of Chicago president Michael Moskow said on Monday. – Reuters  

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