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Economic recovery in US losing momentum

US manufacturing output barely rose in September and contracts to buy previously owned homes recorded their largest drop in nearly three and a half years, the latest signs the economy’s momentum ebbed as the third quarter ended.

The reports yesterday showed economic activity was on weak footing even before a 16-day partial shutdown of the US federal government early in October that is expected to weigh on fourth quarter growth.

“The economy seems to be losing steam as higher mortgage rates have hit the housing market and destructive government policy will likely bash the rest of the economy,” said Joel Naroff, chief economist at Naroff Economic Advisers in Holland, Pennsylvania.

Manufacturing production edged up 0.1 per cent last month after advancing 0.5 per cent in August, the Federal Reserve said.

Factory output was held back by a 0.5 per cent drop in computer and electronic goods production. Output of electrical appliances also fell.

While automobile output increased 2.0 per cent, that was a sharp slowdown from the 5.2 per cent rise logged in August.

Separately, the National Association of Realtors said its Pending Homes Sales index, based on contracts signed last month, plunged 5.6 per cent to the lowest level since December. The decline was the largest since May 2010.

The index, which leads home resales by a month or two, has now dropped for four straight months. Realtors believe home resales, which dropped in September, peaked in July and August.

 

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