More signs point to an economy on the rebound

WASHINGTON (AP) — Hopes for the fledgling economic recovery got a boost Monday from better-than-expected news on manufacturing, construction and contracts to buy homes.

The surprisingly strong readings provided some comfort that the economy is packing more momentum than assumed going into the end of the year. Still, with jobs scarce, lending tight and consumers wary of spending, it’s unclear whether the gains can be sustained as government stimulus programs wind down.

The Institute for Supply Management’s gauge of manufacturing activity grew in October at the fastest pace in more than three years. It was driven by businesses’ replenishing of stockpiles, higher demand for American exports and support from the government’s $787 billion stimulus program.

The ISM index shot up to 55.7 in October, the third straight reading above 50, which signals growth in the sector. It was the highest level since April 2006.

The overall economy, as measured by the gross domestic product, expanded at a 3.5 percent rate in the July-September quarter. That number provided compelling evidence that the longest recession since the 1930s was ending. Wyss said he expects GDP growth to slow to around 1.7 percent in the current quarter and to remain sluggish in the first half of next year.

In a third report, the National Association of Realtors said the volume of signed contracts to buy previously occupied homes rose 6.1 percent in September to a reading of 110.1. That’s the highest level since December 2006. And it’s more than 21 percent above a year ago.

The eighth straight monthly gain came as the housing market rebounds from the worst downturn in decades.

The improvement has been aided by federal intervention to lower mortgage rates and bring more buyers into the market. For example, the contracts to buy homes rose as buyers scrambled to qualify for a tax credit for first-time buyers that expires at the end of this month. Congress is moving to extend the credit until April 30.

“We think this recovery is sustainable,” said Sal Guatieri, an economist at BMO Capital Markets. “We think there is enough government stimulus in place to push the economy forward and manufacturing will be getting support from a weakening U.S. dollar and strength in Asia which will boost exports.”