WASHINGTON -- The economy is in recovery, a trio of reports released yesterday suggest, with manufacturing activity and consumer spending on the rise and construction spending solid yet slightly lower.
High energy prices and slow job creation are areas of concern for economists, but overall they remain upbeat about the nation's financial condition.
''I think we're actually in the early stages of an expansion," said Gary Thayer, chief economist at A.G. Edwards & Sons in St. Louis. ''It doesn't look like we're firing on all cylinders yet, and there are still some pockets of weakness," Thayer said. ''But the economy as a whole is looking considerably better than it did at this time last year."
The nation's manufacturing sector grew for the ninth consecutive month in February, the Institute for Supply Management reported yesterday, but the expansion was at a slightly slower pace than expected. The Commerce Department, meanwhile, said consumer spending and disposable income increased in January, while construction spending dipped in January for the first time since May.
''Overall, the numbers are very positive," said John Silvia, chief economist at Wachovia Corp. in Charlotte, N.C. The ISM's manufacturing index was 61.4 in February, down from a revised 63.6 in January and below the 62 reading forecast by analysts. An index reading above 50 indicates expansion; a reading below 50 indicates that manufacturing activity is contracting.
Silvia said the most important trends to note in the manufacturing data were in the areas of factory production and new orders, which have grown for 10 straight months. However, while the employment index expanded for fourth months in a row, Silvia said he remains concerned about the actual number of jobs the US economy is adding. The economy has lost 2.2 million jobs since January 2001.
''I think you're seeing a lot of manufacturing firms hiring a small number of people, but some big job losses in a few areas," such as furniture, textiles, and apparel, he said. Thayer, though, said he was not as concerned about the jobs outlook, arguing there is a natural lag between the time manufacturers say they have begun hiring and the point at which the actual size of the workforce can be accurately assessed. He also believes manufacturers will begin to hire more aggressively as productivity slows.
That said, Thayer issued a warning about the high price of energy, saying it has already dampened consumer confidence and, if it continues, could cause consumer spending to stagnate. The futures price of oil is about $37 a barrel, and that has made heating oil, gasoline, and even natural gas more expensive. ''I think that's weighing on consumer confidence right now," Thayer said.
The Conference Board reported last week that consumer confidence tumbled in February. Consumers boosted spending by 0.4 percent in January as disposable income -- what's left after taxes -- rose by 0.8 percent, the Commerce Department reported yesterday. Consumer spending is a closely watched indicator of the country's financial health because it accounts for roughly two-thirds of all economic activity. But there is a growing consensus among economists that business spending needs to pick up if the recovery is to continue.
''I think businesses are still generally cautious," Thayer said, adding that the strategy for boosting productivity has rested on making plants and people more efficient. That notion was supported by a Commerce Department report showing that construction spending dipped 0.3 percent in January, primarily because of weakness in nonresidential spending. It was the first decrease since May as bad winter weather in some parts of the country delayed the start of new projects. Even with the drop, the level of construction spending hovered near an all-time high.
Major stock indexes rose yesterday. The Dow Jones industrial average jumped 94.22 to 10,678.14. The technology-focused Nasdaq rose 27.98 to 2,057.80, and the Standard & Poor's 500 index was up 11.03 at 1,155.97.