Manufacturing Stages Surprise Recovery in January

The U.S. manufacturing sector staged a surprise recovery, while consumer sentiment improved in January, but construction spending in the U.S. fell for the third month in a row, reflecting continued weakness in the housing sector.

Manufacturing Cars
Gary C. Knapp
Manufacturing Cars

U.S. factory activity rose into expansion territory in January after contracting in December to the weakest since April 2003, according to an industry report released Friday.

The Institute for Supply Management said its index of national factory activity rose to 50.7 in January from 48.4 in December, and above economists' median forecast for a reading of 47.3. A reading above 50 indicates expansion.

Meanwhile, U.S. construction spending fell a sharper-than-expected 1.1 in December, led by a decline in private home construction as the housing market continued its slide, government data on Friday showed.

December's decline to a $1.140 trillion seasonally adjusted annual rate, its lowest since $1.133 trillion in July 2005, came after a revised 0.4 percent decline in November, first reported as a gain of 0.1 percent.

Analysts polled by Reuters ahead of the report were expecting construction spending to fall 0.5 percent.

Private home construction fell 2.8 percent in December to a $462.0 billion rate, the 22nd consecutive monthly decrease since a peak in February 2006.

In other declines, private construction was off 1 percent while public construction was down 1.5 percent. The only major sector to increase was private nonresidential construction, rising by 1.3 percent.

Consumer Sentiment Picks Up

Separately, U.S. consumer sentiment rose less than expected in January from December, although worries persisted over sharp declines in the stock market and the housing slump, a survey released Friday showed.

The Reuters/University of Michigan Surveys of Consumers said its final January figure on consumer sentiment was 78.4, above December's final reading of 75.5.

However, it was down from preliminary January estimates of 80.5 and slightly below the median forecast of 79.0 in a Reuters poll.