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In another sign of an improvement, a gauge of future home sales rose more than expected in July
NEW YORK — The U.S. manufacturing sector grew in August for the first time in 19 months, adding to evidence that the recession is ending.
The better-than-expected reading Tuesday by the Institute for Supply Management showed the highest number for its manufacturing index since June 2007. New customer orders jumped to a level not seen since late 2004.
And in another sign of an improving economy, a gauge of future U.S. home sales rose more than expected in July to the highest point in more than two years.
The reports raised hopes for a broad economic rebound. Still, as long as consumers remain hamstrung by weak pay and job losses, and wary of ramping up spending, the economy might not be able to sustain a recovery.
Consumers did buy more cars last month, due mainly to the popular Cash for Clunkers program, which boosted Ford Motor Co.’s U.S. sales 17.2 percent over last year. Shortages of smaller vehicles weighed on rival Chrysler.
Other automakers are expected to release U.S. sales figures later Tuesday that are likely to mark the first year-over-year monthly sales gain for the industry since October 2007.
The clunkers program, which ended on Aug. 24, spurred 690,114 new sales, at a taxpayer cost of $2.88 billion by offering up to $4,500 toward new, more fuel-efficient cars and trucks.
“Manufacturing will continue to expand,” but capital investment will decline because plants have too much excess capacity, said Daniel Meckstroth, chief economist for the Manufacturers Alliance, a trade group. “You’re going to see ups and downs.”
On Wall Street, stocks plunged despite the positive housing and manufacturing reports. Analysts said much of the improving economic data already were priced in following a six-month climb in stocks. The Dow Jones industrial average lost about 165 points in afternoon trading, and broader indices also fell.
The ISM, a trade group of purchasing executives, said its manufacturing index rose to 52.9 in August, from 48.9 in July. It’s the first reading above 50, which indicates expansion, since January 2008. Analysts polled by Thomson Reuters had expected a reading of 50.5.
New orders jumped nearly 10 percentage points to 64.9 in August, their highest level since December 2004. With strong new orders for two straight months, production should grow at “reasonable rates” for the rest of the year, said Norbert Ore, chair of ISM’s manufacturing survey.