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Manufacturing Numbers Show Signs of Hope

Manufacturing activity fell in May but at the slowest pace in eight months, providing further evidence that an economic recovery could be near.

More signs of a waning recession came in reports Monday that April consumer spending dipped modestly while construction outlays rose.

New factory orders increased for the first time since November 2007, while production and exports fell less steeply, the Institute for Supply Management said. Yet the shrinking auto industry - General Motors filed for reorganization Monday - likely ensures a tepid rebound, says economist Cliff Waldman of the Manufacturers Alliance/MAPI.

The manufacturing index was 42.8 in May, up from 40.1 in April. That was the fifth-consecutive monthly increase. An index above 50 indicates factory expansion; below 50 means contraction.

RDQ Economics' John Ryding called it the clearest sign yet that the recession is near a bottom.

Among the bright spots: Inventories shrank more quickly. As stocks are liquidated, companies boost production.

Yet factory employment continued to fall, curbing wages and consumer spending. Such spending fell 0.1 percent, after a 0.3 percent drop in March, the Commerce Department said. Personal income rose 0.5 percent, partly because of the stimulus package's tax cuts and higher jobless benefits.

But consumers are socking away extra cash. The personal savings rate jumped to a 14-year high of 5.7 percent. Construction outlays rose 0.8 percent in April, the Census Bureau said, bolstered by a jump in home upgrades.

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