THE ECONOMY Mixed signals reported

Residential building boosts construction numbers.
WASHINGTON (AP) -- Construction spending surged in August to the highest level on record, while manufacturing grew at a slower pace in September, offering mixed signals about the economy's strength.
The Commerce Department reported today that the value of buildings put in place clocked in at a seasonally adjusted annual rate of $1.02 trillion, a record high. That represented a 0.8 percent increase in August from July's level.
The vigor exhibited in construction in August partly reflected a strong showing in residential projects by private builders, which hit a record high.
The 0.8 percent advance was twice as big as the 0.4 percent increase the economists were forecasting. In more encouraging news, July's performance turned out to be even stronger than previously estimated. Revised figures showed that construction spending jumped by 1.1 percent in July from the previous month.
"This was an extremely strong and encouraging report," said Kenneth Simonson, chief economist at Associated General Contractors of America.
Manufacturing
Separately, the Institute for Supply Management reported that its manufacturing index registered 58.5 in September, down from 59 in the previous month. An ISM reading of 50 or above means that the manufacturing sector is expanding, while a figure below 50 suggests activity is shrinking. The latest reading was slightly higher than the 58.3 expected by economists.
Steve Stanley, chief economist at RBS Greenwich Capital, said the factory sector is settling "into a healthy pace of advance after exploding out of weakness late last year and early this year."
Even though the reports offered some mixed signals, analysts said they still reinforced the view of Federal Reserve Chairman Alan Greenspan and his colleagues that the economy has regained some traction after hitting a soft patch in the late spring and early summer.
Citing signs of some economic improvements, the Federal Reserve last month boosted short-term interest rates for a third time this year. That pushed up a key rate to 1.75 percent, still low by historical standards.