US factories roar but unemployment claims rise
US manufacturing activity is at its highest level since June and construction spending increased in October, both signs that an economic recovery in the US could be on the horizon.
The index for factory activity rose to 52.7, compared to 50.8 in October, according to the Institute for Supply Management. That data exceeded analysts’ expectations.
However, as unemployment claims rose last week, economists are expecting slow growth in the labour market.
“The economy seems finally to be developing real momentum; growth is accelerating,” said Ian Shepherdson, chief US economist at High Frequency Economics.
Shepherdson added that there are indications for further growth, expecting the index to rise to 54 by January.
“We could see an acceleration in the momentum … in the manufacturing sector and the economy more generally,” said Millan Mulraine, a macro strategist at TD Securities in New York.
In another report, construction spending is up 0.8 per cent to an annual rate of $798.53bn (£508.77bn), according to the Commerce Department.
This gain is much stronger than the 0.03 per cent gain projected, said Shepherdson.
“New build housing rose only 0.4 per cent, but the trend is now clearly upwards, with a nine per cent annualised gain in the three months to October, compared to the previous three months.
“That’s the best performance, excluding periods boosted by the homebuyer tax credit, since early 2006,” he said.
While initial unemployment claims below 400,000 can be seen as an improvement to the labour market, claims rose to 402,000 from 396,000 the previous week, the Labor Department said.
“They’re not in a danger zone, but the trend is not becoming healthier,” Pierre Ellis, an economist at Decision Economics in New York, said of the claims data.
US Treasury debt prices held steady while stock prices were lower.