U.S. Growth Probably Now at 4.5 Percent

The economy continues to rebuild itself and the manufacturing sector has now grown for three consecutive months. According to the Institute for Supply Management, their PMI registered 55.7 percent. That is 3.1 percentage points higher than the 52.6 percent reported in September. It was the highest reading for the index in over 3 years and manufacturing output month over month rose at the fastest pace in 63 months.

This year, the PMI has correlated extremely accurately with the growth in the overall economy. When annualized the current reading corresponds to a 4.5 percent GDP growth rate.

In more good news on Monday, the National Association of Realtors said its Pending Home Sales Index, rose 6.1 percent -- the index is now at its highest level in nearly three years.

An additional report from the US Commerce Dept showed that U.S. construction spending made its largest gain in a year in September. The report reflected a huge increase in private residential building -- the largest increase in more than six years.

In continued positive earnings news: For the first nine months of the year, Ford (F) has now posted a $1.8-billion profit. That’s a $10.6-billion improvement from the same period a year ago. Surprisingly, Ford said that even without Clunkermania, it would have showed a profit. Further, Ford said it “expects to be solidly profitable in 2011, with positive operating-related cash flow.”

On the jobs front, the ISM's Employment Index registered 53.1 percent in October, which is 6.9 percentage points above the reading reported in September. This indicates the first month of growth in US manufacturing employment in over a year. Eight of the ISM's 18 manufacturing industries surveyed reported growth in employment in October.

To recap, the overall economy is now growing robustly, the housing market continues to recover steadily, earnings news continues to be extremely positive, and it now appears that we've seen the early concrete indications of employment growth.

While there continues to be fallout from the deep recession earlier in the year, it is becoming clearer by the day that upward economic momentum will persist and that this will not be a jobless recovery.

Comments

[TradingHelp...:]

Decent summary of the good news.

Is 9.8% unemployment and $11 trillion of government debt worth a mention to balance the scales a little?

And 4.5% growth is a little optimistic considering the US consumer is not yet ready to replace the government stimulus to drive economic growth:

www.bullionvault.com/#...

Nov 03 06:38 AM

[William M. ...:]

"It was the highest reading for the index in over 3 years and manufacturing output month over month rose at the fastest pace in 63 months."

This is great news. You'd think we would have been hearing about manufacturing firms hiring this summer. Is this showing up in employment?

We have had two weeks of very positive economic news. Unfortunatly the market has been acting like it has been two weeks of bad news.

Nov 03 07:50 AM

[athena:]

I'll bet that profit margins will be dropping soon.

Nov 03 08:42 AM

[Dave Wrixon:]

Well as it now apparent that the Stimulus number is only a net figure and the gross cost were much higher then it might be reasonable to expect it to distort the GDP figures by this amount. Does that mean that anyone in the US outside Goldman Sachs is feeling better off?

Nov 03 09:26 AM

[David Roskoph:]

Indeed the recovery is at hand and the recession a painful memory. However, the market's invisible hand must shake all available easy money out. Ergo, taking 'er down as the recovery manifests will convince the loose hands that a double dip is dead ahead. Forget it! Emotional trends are tough to kick.

This is a recovery for the textbooks, starting from the once-cancerous inards out; we are a stronger nation going forward. The one-card-monty of (too) free market capitalism - that gave us the contract law dot-com and real estate booms - will be replaced by something with better odds. Why even the Federal Reserve is threatening to be more responsible.

Nov 03 01:39 PM

[Dr. Acula:]

Woah dude, I smoked some crack stimulants last night and feel 4.5% better too. But I am desperately craving more stimulants already. I hope my dealer Mr. Chan keeps accepting my IOU's. If he cuts me off I'm going to bust into his house.

Nov 03 06:05 PM

[j-dub:]

"U.S. Growth Probably Now at 4.5 Percent."

Under Obama's policies?

Yeah, and Steve Wynn is Mary Poppins

Nov 03 09:42 PM

[hopesprings...:]

Would love to see an analysis of the jobs lost vs. jobs created.

Replacing a job that paid 50K+ a year with two jobs that each pay 10-15K a year is not exactly a reason to stand up and cheer, IMHO.

Nov 05 06:53 AM