Housing is the economy's bright spot

US construction spending grew in October, fueled by gains in the housing market. But manufacturing appears to be softening as fiscal cliff worries grow.

By Charley Blaine Dec 3, 2012 2:54PM
Home under construction -- CorbisHere's where things stand on the economy.

It's OK, not great. But one piece of the economy is starting to show real strength: construction. Manufacturing is stalling.

Construction spending in October rose to an annualized $872.1 billion, up 1.4% from September and up 9.6% from October 2011, the Commerce Department said Monday. Residential spending rose to an annualized $294.2 billion, up 3% from September and 20.8% from October 2011.

Nonresidential construction spending was up 0.3% in October from September and up 10.7% from October 2011.

The construction put dollars to increasing evidence of a housing recovery after a near collapse of markets in many metro areas. Places like Phoenix, Miami, Las Vegas and Bend, Ore., saw sales and prices plummet starting in 2007.

Single-family construction spending was $141.3 billion, up 3.6% from September and 29% from a year earlier. Apartment construction, at $23.9 billion, was up 6.2% from September and 53.2% from a year earlier.

Housing starts are starting to push higher, and new-home sales are building. (New-home sales were off very slightly in October from September but up substantially from the year before.) The gains, however, are not uniform across all markets, however.

Offsetting the decent news on construction was a surprisingly weak report on manufacturing from the Institute for Supply Management. The ISM's latest report suggested manufacturing contracted in November after two months of modest increases.

The overall economy continues to grow, the report said.

The ISM's manufacturing index fell to 49.5% from 51.7% in October. The November level was the lowest in three years.

Of the 18 manufacturing industries covered by the report, only six showed gains: oil and coal; paper; furniture (a reflection of the housing recovery and increasing consumer confidence); electrical equipment; appliances; food and beverage and computers and electronic equipment.

Both exports and imports declined.

The biggest reason cited for the decline was worries about the fiscal cliff, the combination of tax increases and federal spending cuts set to kick in some time in 2013.

What's not clear is how much Superstorm Sandy affected manufacturing. One respondent, from a primary metals company, told the ISM that the storm affected some shipments.

Some manufacturers see strength ahead. Ford Motor (F) announced Monday it expected to boost production in the first quarter of 2013 by 11% to 750,000 vehicles. The company reported November sales rose 6% from a year ago.

Disappointment with the ISM reason was cited as a reason for the stock market's lackluster performance Monday.

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8Comments
Dec 3, 2012 4:34PM
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Housing the Economy's bright spot! Really!

Here is an example of how good this Economy really is!!

Take one minute to do this...goggle "cslb" click on "check a license"

click on "business name" enter any name you choose even your own! hit enter..

Scroll over a few pages... 

Not a whole lot of us legal contractors left any more.No companies left to work for!

No jobs!! No tax base!! No economy!! Pretty Simple!!

Dec 3, 2012 5:16PM
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This has to be a joke. There is so much good housing on the market you have to be a real idiot to build new. Beautiful homes in the South Barrington and Lake Zurich built on two and three acres on lakes and with swimming pools can't even be sold for $300,000. They were once worth about $900,000. Banks  are still foreclosing on properties in the Chicago area and you can buy some time-tested buildings for a fraction of their values at their highest prices.  
Dec 4, 2012 7:21PM
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The Republican creed /motto - say something ofen enough - and loud enough - someone will start to believe it....please stand in front of a mirror and repeat it all day long - - - so atleast you'll believe it....People buy imports to save money -.-   HOW DO YOU THINK - -  THEY WILL EVER BE ABLE TO AFFORD A HOME - OH, GEE - YOUR JOB IS GONE AND SO IS YOUR HOME......

hear me....hear me    BUY AMERICAN.......DO NOT SELL OUT AMERICA

Dec 4, 2012 7:14PM
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. . Housing is the economy's bright spot......HOUSING IS TODAY's  FRUAD - - - FORECLOSURES STILL HAVE NOT BEEN ADDRESSED.....THE BUBBLE GROWS.....AND WILL BLOW-UP AGAIN - - -   LOOK AT WHAT IT IS BASED ON
Dec 4, 2012 10:00PM
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Say it isn't so, Charley... you can be bought for Kool Aid?
Dec 3, 2012 10:51PM
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If construction is so good why are building material distributors and forest product manufacturers struggling?
Dec 4, 2012 1:53PM
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Housing, Like retail sales, are the result of a good economy, not something that causes or creates a good economy.  Obama should know this as relying on these two things is what got the Bush economy in so much trouble.  A lean government without large deficits, a solid finance/banking system financing a strong service/manufacturing base, healthy import/export ratio, etc.  These are the things that make for a strong economy.  Clinton, Reagan, they got this...Obama...he sounds a lot like Bush.
Dec 4, 2012 12:59PM
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The Fed is buying mortgage backed securities at the tune of 40 billion a month, what do you expect?
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