Economy gets boost from building, manufacturing

June 2, 2010 at 12:00a.m.

Associated Press

WASHINGTON

The economic recovery is gaining strength from the biggest rise in construction spending in nearly a decade and the 10th-straight month of expansion for manufacturers.

The two positive reports eased some fears that the debt crisis in Europe might be starting to stunt the U.S. economic rebound.

“The recovery is still on track,” said Brian Bethune, a senior economist at IHS Global Insight. Though Europe’s troubles will put a drag on profits at U.S. companies that do business overseas, Bethune said, “it’s not going to be a show- stopper.”

The burst in April construction spending reported Tuesday by the Commerce Department sent a promising signal for an industry that was among the hardest hit during the recession. The 2.7 percent increase was spread across all major sectors. But temporary government incentives fueled gains in two of three major categories. The economy eventually will have to manage with less government support.

In a separate report, the Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index dipped only slightly in May from a nearly six-year high in April. But the 59.7 reading for May was well above the 50 level that indicates expansion. Export orders rose despite Europe’s troubles.

The group’s employment index, which measures employers’ willingness to hire, rose 1.3 percent. That was the highest level since May 2004. New orders, a gauge of future production, were unchanged.

John Silvia, chief economist at Wells Fargo, said, “It does look like there’s sustainable economic growth in the U.S. for the time being.”