U.S. manufacturing expanded unexpectedly and construction spending fell less than forecast, according to data released Wednesday by the Institute for Supply Management and the Commerce Department. The ISM's manufacturing index rose to 51.4 from 49.5 in November, beating analyst forecasts of 50; anything over 50 signals expansion. Construction spending dropped 0.2% percent in November following a 0.3% drop in October that itself was smaller than originally reported;. The figures suggest the economy will extend its five-year streak into 2007 despite housing and automotive slumps. Growth in exports and healthy consumer spending have helped businesses trim inventory gluts; uncertainties for manufacturers include declining commodity prices (many stocked up on raw materials at higher prices) and dollar volatility. Also Wednesday, an ADP Employer Services report said U.S. companies unexpectedly shed 40,000 jobs in December -- the first drop since April 2003. Following the report economists were quick to pare their estimates of the Labor Department's Friday job creation report -- the median forecast fell from 115,000 to 100,000.
• Sources: ISM Press Release, Construction Spending from Census Bureau (.pdf), ADP Employer Services, Wall Street Journal, Bloomberg
• Related commentary: Economy's Ready To Shake Off Housing, CPI Numbers Don't Square With Reality - Market To Climb Anyway
• Potentially impacted stocks and ETFs: PowerShares Dynamic Building & Construction (PKB), iShares Dow Jones US Consumer Goods ETF (IYK), Consumer Discretionary SPDR ETF (XLY), Vanguard Consumer Discretionary VIPERs (VCR)
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