Manufacturing and Construction Spending tip US economy closer to recession.

The manufacturing industry has seen has suffered a five year low whilst spending on new construction has fallen at its sharpest rate since 1994, as the US economy tip toes towards recession.

With the near collapse of the US property market consumer spending has resulted in further factory cutbacks, as the Institute for Supply Management’s factory index dropped to 48.3 in February from 50.7 at the start of the year.

During the same period spending on building projects slumped by 1.7 percent more than estimated.

With continued rumors and rumblings of recession have exacerbated the situation and killed the appetite and confidence in the property market.

The house building industry has reported three successive years of low revenues, resulting in a reduction of new projects and inventory levels In order to manage costs.

A factory survey released today revealed similar problems for manufacturing, as production dropped to 50.7 from 55.2 and supplier deliveries fell to 50.1 from 52.8 in the prior month.

This is significant considering that factory activity accounts for about 12 percent of gross domestic product.

Chairman Ben S. Bernanke told congress this week that: “the possibilities that the housing market or the labor market may deteriorate more than is currently anticipated and that credit conditions may tighten substantially further.”

It is evident that the current conditions are likely to be made worse and that the estimates for the quarter are that the economy will grow at a 0.5 percent annual which will result in the weakest six months the last slump endured in 2001.

Story link: Manufacturing and Construction Spending tip US economy closer to recession.