Builders increase project spending
to 1,409, and the Nasdaq composite lost 8 points to 3,002.
Businesses expressed concerns about the “fiscal cliff.” That’s the name for sharp tax increases and government spending cuts that will take effect in January if Congress and the Obama administration fail to strike a budget deal before then.
Worries about the fiscal cliff have led many companies to pull back this year on purchases of machinery and equipment, which signal investment plans. The decline could slow economic growth and hold back hiring in the OctoberDecember quarter.
A measure of hiring in the ISM survey fell to 48.4, the lowest reading since September 2009.
Companies “are just backing off and not making any moves until things clear up a bit,” Bradley Holcomb, chairman of the ISM’s survey committee, said.
Superstorm Sandy had only a limited impact on factory activity last month, according to the ISM survey.
The storm hit the East Coast on Oct. 29 and affected businesses in 24 states.
Two regional manufacturing surveys released in mid-November showed the storm disrupted factories in the Philadelphia and New York regions. On Friday, the government said Sandy contributed to a decline in consumer spending in October.
The economy grew at a 2.7 percent annual rate in the July-September quarter, much better than the 1.3 percent pace in the April-June quarter. But most economists expect growth will slow to below 2 percent in the final three months of the year, mostly because of Sandy and the impact of the fiscal cliff.
U.S. consumers cut back on spending last month while their income remained flat. The decline was partly related to the storm. Still, economists said fear of higher taxes played a role in the diminished spending figure. Consumer spending drives nearly 70 percent of economic activity.
Surveys show consumers remain upbeat about the economy, despite the worries about taxes and spending cuts. A measure of consumer confidence reached a fiveyear high in November. More consumer spending could boost factory output.
If lawmakers and President Barack Obama can work out a budget deal that averts the tax increases, most economists predict a good year for the economy.
Also Monday, the Commerce Department said U.S. builders increased their spending on construction projects in October by the largest amount in five months, led by a surge in housing.
Construction spending rose 1.4 percent in October. It was the largest gain since a 1.7 percent increase in May.
The increase raised spending to a seasonally adjusted annual rate of $872.1 billion. That is nearly 17 percent higher than a 12-year low hit in February 2011.
Still, even with the gain, the level of spending on construction remains only about half of what’s considered healthy.
Housing construction spending jumped 3 percent in October. Nonresidential building rose 0.3 percent. The government said Superstorm Sandy had only a minimal effect on the figures.