Construction, manufacturing, GDP post vigorous growth; October auto sales retreat

November 11, 2003

Vol. 3, No. 44

Oct. 28-Nov. 3, 2003

The Data DIGest

The value of construction put in place soared to a third straight record in September at a seasonally adjusted annual rate, the Census Bureau announced today. The $911 billion rate was 1.3% above the upwardly revised August total and 6.5% ahead of September 2002. Construction put in place in the first nine months of 2003 is 3% higher than in the same period of 2002. Private nonresidential construction grew 2.5% for the month to its highest rate since March. Private residential construction gained 1.4% and set a third consecutive record. Public construction minimally surpassed the August total, setting a record for the fourth month in a row.

The manufacturing PMI (formerly purchasing mangers' index) of the Institute for Supply Management rose for the fourth month in a row, to its highest level in nearly four years. Fourteen of 20 industries surveyed reported growth. The production, new orders, and backlog of orders indexes all rose but the employment index remained below the breakeven mark for the 37th straight month.

Reuters reported this afternoon, “Automakers estimated that October's U.S. sales of cars and light trucks ran at a seasonally adjusted annual rate of roughly 15.7 million vehicles. That's slightly ahead of October 2002, but below analysts' estimates of 16.1 million and well off August's 18.9 million rate.”

Personal income rose 0.3% at a seasonally adjusted annual rate in September, matching the July and August changes, the Bureau of Economic Analysis (BEA) reported Friday. In contrast to this stable growth for overall income, disposable (net of payroll and income tax) personal income plunged 1%, following gains of 1% in August and 1.6% in July. The volatile numbers reflect the drop in withholding that took effect in early summer for wage earners and the one-time, $400-per-child “rebate” checks the IRS mailed to millions of households in July and August. Households responded by increasing personal consumption expenditures by 1% in July and 1.1% in August and cutting them 0.3% in September.

Real (net of inflation) gross domestic product skyrocketed 7.2% in the third quarter, the largest gain in nearly 20 years, according to BEA's advance estimate Friday. BEA said real private domestic investment in nonresidential structures dropped 2.4% after rising 4.2% in the second quarter. Real investment in nonresidential buildings, including farm, rose by 1%, double the gain in the second quarter; investment in utilities fell11% vs. 6% in the second quarter. (The new and upwardly revised construction figures released by Census today suggest BEA's next estimate for structures and GDP could go higher.)

Total compensation costs for civilian workers rose 1%, seasonally adjusted, in the third quarter, “virtually unchanged from the 0.9% gain from March to June,” the Bureau of Labor Statistics reported Thursday. Benefit costs increased 1.5%, vs. 0.7% for wages. Total compensation in construction rose 0.8% in the third quarter, 1.1% in the second, as wages climbed 0.9%, following a 1% rise. Over the 12 months through September, total compensation rose 4% for private industry workers as a whole, 3.8% for construction; the rise in wages was 3% overall and 3.1% in construction. (Benefit cost increases are not broken out for construction.)

New orders for manufactured durable goods, excluding semiconductor manufacturing, rose 0.8%, seasonally adjusted, in September, the fourth increase in five months, Census reported.

The Federal Open Market Committee voted unanimously on Tuesday to hold its short-term interest rate target steady again, as it had in its two previous meetings, saying that “spending is firming, and the labor market appears to be stabilizing….the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal. In contrast, the probability, though minor, of an unwelcome fall in inflation exceeds that of a rise in inflation from its already low level. The Committee judges that, on balance, the risk of inflation becoming undesirably low remains the predominant concern for the foreseeable future.”