Builders in­crease project spend­ing

Econ­omy

Austin American-Statesman - - BUSINESS - B A worker stands at a drill press in the fab­ri­ca­tion area of the Verdin Corp. pro­duc­tion fa­cil­ity in Cincin­nati in early Novem­ber. Ty WRIGHT / bloomberg

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.

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