Bill Losey’s Weekly Economic Update for Oct. 4, 2010

CONSUMER SPENDING UP 0.4%
August personal spending beat the 0.3% gain forecast by economists polled by Bloomberg News. Personal income was up 0.5% for August, the biggest monthly gain of 2010. The “core” PCE price index (minus food and energy prices) rose just 0.1% in August, a signal of tame inflation. The personal savings rate ticked up to 5.8% from 5.7%.

MIXED RESULTS FROM CONSUMER POLLS
Early last week, the Conference Board’s consumer confidence index slumped to 48.2 for September, more than five points below forecasts. Yet a fresh Reuters/University of Michigan consumer sentiment survey surprised analysts Friday – that barometer came in at 68.2, above the consensus of 67.0 forecast by Bloomberg and improved from the previous 66.6 reading.

ISM: MANUFACTURING GROWS MODESTLY
The Institute for Supply Management released its September manufacturing index on Friday. The September reading – 54.4 – indicated further growth, but also the slowest pace of expansion in 10 months.

SURPRISE INCREASE IN CONSTRUCTION SPENDING
Analysts surveyed by Reuters felt we would see a 0.4% drop in this indicator for August. Instead, construction spending rose by 0.4% in that month (a month in which housing starts also surged). The downside: investment in private sector projects hit its lowest level since January 1998.

FRIDAY GAINS WRAP UP A DOWN WEEK
The DJIA’s four-week winning streak ended Friday, even as the index gained 41.63 on the first day of October. For the week, the DJIA went -0.28% to 10,829.68, the S&P 500 went -0.44% to 1,146.24 and the NASDAQ went -0.21% to 2,370.75. The final September numbers were pretty spectacular: DJIA, +7.72%; S&P 500, +8.76%; NASDAQ, +12.04%. Statistically, September 2010 was the best September for the Dow and S&P in 71 years. All ten industry groups in the S&P 500 advanced last month.