Economic reports lift hopes for a rebound

NEW YORK - Hopes for the fledgling economic recovery got a boost yesterday from better-than-expected reports on manufacturing, construction and contracts to buy homes.

U.S. manufacturing activity grew in October at the fastest pace in more than three years, according to a private group's measure. It was driven by government spending, businesses' need to rebuild their inventories and higher demand from overseas.

Separately, the Commerce Department said construction spending rose in September on the strength of home building. The report supported optimism that the ailing housing sector was starting to revive.

Finally, the number of signed contracts to buy previously occupied homes rose for the eighth straight month in September, according to the National Association of Realtors.

But even after the three reports were released, President Obama cautioned that the public and private sectors must find more ways to create jobs to continue the recovery.

"We are still seeing production levels that are significantly below peak levels, and most distressing is the fact that job growth continues to lag," Obama said.

With jobs scarce, lending tight and consumers wary of spending, it's unclear whether the strength can be sustained as government stimulus programs wind down. For example, the contracts to buy homes rose as buyers scrambled to take advantage of a tax credit for first-time owners that expires at the end of this month. Congress is moving to extend the credit until April 30.

The Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index grew in October at the fastest pace since April 2006. The ISM index read 55.7 last month compared with 52.6 in September. It's the third straight reading above 50, which indicates growth.

Analysts polled by Thomson Reuters had expected a level of 53.

In October, the ISM said 13 of the 18 manufacturing industries surveyed expanded, led by petroleum and coal production, apparel and furniture. Three industries shrank.

Construction spending in September rose 0.8 percent, beating expectations, due mainly to the largest jump in housing construction in more than six years, although the August performance was revised down to a 0.1 percent drop. The initial estimate had been a 0.8 percent gain.

Homes sales contracts rose 6.1 percent in September from August, the National Association of Realtors said. Contracts are a barometer of future home sales.