Construction at Record Levels, Manufacturing Jumps Sharply Even with Hurricanes

- Construction Spending for August rose .4% versus estimates of a .4% increase and a .3% gain in July.
- ISM Manufacturing for September rose to 59.4 versus estimates of 52.0 and a reading of 53.6 the prior month.
- ISM Prices Paid for September rose to 78.0 versus estimates of 73.0 and a reading of 62.5in August.

BOTTOM LINE: US construction spending rose in August to a record, led by a jump in highway projects, and may climb for the rest of the year as rebuilding after Hurricane Katrina accelerates, Bloomberg said. Spending on residential construction rose .2%, non-residential construction spending rose .7% and government-funded construction rose .5%. Construction will remain very strong for the foreseeable future as the effects of the highway bill and hurricane rebuilding take hold.

US manufacturing unexpectedly accelerated in September, suggesting the recovery from two Gulf Coast hurricanes will be rapid, Bloomberg reported. The new orders component of the index rose to 63.8 from 56.4 in August. The employment component of the index rose to 53.1 from 52.6 in August. This is the third manufacturing reading to show acceleration in September, which is remarkable considering the effects of the hurricanes. Manufacturing will continue to boost economic growth through year-end. I expect the prices paid indices to begin decelerating again towards year-end.