Thursday, May 06, 2010

Economic Outlook Is Cautious Even With Spending Up

From The Associated Press:

Factories are churning out more goods. Consumers are spending. Government aid is fueling construction activity. But stagnant pay and weak hiring will likely restrain the economic rebound in coming months.

That cautionary picture emerged from a series of economic reports Monday.

Consumers stepped up their spending in March by the largest amount in five months. Yet the increase was financed out of savings. Incomes rose only slightly.

Unless employers boost pay and ramp up hiring, economists say consumer spending will likely taper off and dampen the recovery.

The construction industry remains a concern, too. Industry spending rose 0.2 percent in March, the first increase in five months, Commerce said. But all the strength came from government activity — much of it related to temporary stimulus money that's expected to run out soon. By contrast, construction by the private sector fell to the lowest level in a decade.

One sector that's helping drive the recovery is manufacturing. Factory activity in April grew at the fastest pace in nearly six years, according to the Institute for Supply Management, representing purchasing executives. Its manufacturing index rose to 60.4 in April from 59.6 in March — the ninth straight month of growth. A level above 50 indicates expansion.

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