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Published: Thursday, 7/2/2009

Construction, joblessness still clouding the economy


WASHINGTON - Brighter news on manufacturing is offering more hope that the longest recession since World War II is near an end. But with construction and many other segments of the economy still weak and unemployment rising, any rebound likely will be slow.

A key gauge of manufacturing showed yesterday that industry activity declined less than expected in June. The Institute of Supply Management's manufacturing index posted a 44.8 - the best showing since August, a month before the financial crisis erupted.

The 44.8 reading for June was up from 42.8 in May. Any reading below 50 is viewed as a signal of contraction in manufacturing.

Manufacturing sectors overseas also signaled a bit of a rebound.

But other U.S. economic news was more mixed.

Outside of manufacturing, construction spending fell in May for the seventh time in eight months. Spending dropped more than expected as strength in nonresidential building was eclipsed by a decline in housing construction and weakness in government projects.

But in a hint of better days to come, the National Association of Realtors said an index of pending home sales edged up 0.1 percent in May. It was the fourth-straight advance for the index, which tracks contracts to buy previously owned homes.

"I think the great recession is winding down," said Mark Zandi, chief economist at Moody's Economy.com.

"Retailing should firm a bit in the next few months, helped by the stimulus package, and I think lean inventories will trigger production increases."

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