Mixed Economic Signals Growing More Positive

Washington, DC, Oct. 1, 2009--Consumer spending, which accounts for about 70 percent of economic activity, is showing signs of life as the economy transitions from recession to recovery.

The key question is whether the spending rebound can be sustained while U.S. households face rising employment, tight credit conditions and other obstacles.

Economists believe that consumer spending surged in August, reflecting the success of the government's Cash for Clunkers car rebate program.

While layoffs have slowed, they have not stopped, and many workers remain fearful about what the future holds.

The Commerce Department is scheduled to report on consumer spending for August today. In advance of that report, economists surveyed expect that spending surged 1.1 percent, up from the 0.2 percent rise in July.

The Institute for Supply Management is expected to report today that its gauge of manufacturing activity rose further into positive territory in September with a reading of 54. That would compare to an August reading of 52.9, which had marked the first time in 19 months that the manufacturing barometer had flashed an expansion signal. A reading below 50 indicates manufacturing is contracting.

The number of newly laid-off workers filing for unemployment benefits is expected to post a slight rise, climbing to 535,000 last week from 530,000 the previous week, according to analysts.

In a fourth report, an index from the National Association of Realtors that tracks pending home sales is expected to rise for an eighth straight month in August.

However, a separate report on construction spending was expected to show a dip of 0.2 percent for August, matching the July drop, as weakness in nonresidential activity offsets a rebound in single-family homebuilding.