US manufacturing contracted at a less severe pace last month, while consumer spending rebounded in January, according to reports today that provided little cheer for an economy mired recession.
The Institute for Supply Management's index of national factory activity rose to 35.8 in February from 35.6 in January, just above economists' forecasts for a reading of 33.8.
But the manufacturing employment index fell to a record low in February, as financial markets brace for another US jobs report scheduled for Friday. Analysts expect US payroll employment to have dropped 648,000 in January, with the unemployment rate jumping to 7.9% from 7.6%.
A separate report from the Commerce Department showed consumer spending rebounded 0.6% in January, the largest increase since May, after falling an unrevised 1% in December.
Incomes advanced 0.4%, also posting the biggest increase since May, after December's 0.2% decrease. But the gains in January are likely to be temporary as wages and salaries continue to fall as the 14 month recession deepens.
Savings jumped to an annual rate of $545.5 billion, the highest level since monthly records began in 1959. The saving rate surged to 5% in January, the biggest advance since March 1995, as households uncertain about the economy prefer to conserve their cash.
Data last week showed the US economy shrank at a 6.2% annual rate in the fourth quarter, the deepest contraction since early 1982, when it was in the throes of recession that lasted 16 months.
Consumer spending, which accounts for more than two-thirds of economic activity, declined at 4.3% rate in the fourth quarter, the biggest drop since the second quarter of 1980.
In another report which underscored the severity of the current economic downturn, the Commerce Department said spending on construction projects dropped 3.3% to a seasonally adjusted annual rate of $986.2 billion, the lowest since June 2004, after tumbling 2.4% the prior month.
Private residential spending fell 2.9% in January after December's 4.4% drop. Compared to the same time last year, spending was down 28%. The level of spending, at a $291.5 billion rate, was the lowest in over 10 years.
