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Washington » Hopes for the fledgling economic recovery got a boost from better-than-expected news in three key areas of the economy and surprisingly good results from Ford Motor Co.
Ford, the only Detroit automaker to dodge direct government aid and bankruptcy court, gave investors a welcome jolt with net income of nearly $1 billion in the third quarter and forecast a "solidly profitable" 2011.
The automaker said Monday earnings were fueled by U.S. market share gains, cost cuts and the Cash for Clunkers program, which drew hundreds of thousands buyers to showrooms this summer. Ford's shares rose 58 cents, or 8.29 percent, to $7.58.
The latest results signal that Ford's turnaround is on more solid ground. The company lost more than $14.6 billion last year and hasn't posted a full-year profit since 2005. Although it made a profit in the second quarter, that was mainly linked to debt reductions that cut its interest payments.
The automaker's results, combined with strong readings from the manufacturing, construction and housing sectors provided some comfort that the economy is packing more momentum than assumed going into the end of the year. Still, with jobs scarce, lending tight and consumers wary of spending, it's unclear whether the gains can be sustained as government stimulus programs wind down.
The expanding signs of a U.S. rebound gave an initial boost to investors on Wall Street
The Institute for Supply Management's gauge of manufacturing activity grew in October at the fastest pace in more than three years. It was driven by businesses' replenishing of stockpiles, higher demand for American exports and support from the government's $787 billion stimulus program.
The ISM index shot up to 55.7 in October, the third straight reading above 50, which signals growth in the sector. It was the highest level since April 2006.
Economists cautioned that the manufacturing pattern seen in the past two post-recession recoveries likely will be repeated this time. In each case, early strength in manufacturing, led by companies' restocking of inventories, faded within a few months.
The overall economy, as measured by the gross domestic product, expanded at a 3.5 percent rate in the July-September quarter. That number provided compelling evidence that the longest recession since the 1930s was ending. Many economists expect GDP growth to slow to around 1.7 percent in the current quarter and to remain sluggish in the first half of next year.
Others are more optimistic, with some forecasting that GDP growth could come in around 3 percent in the current quarter. They pointed to the government report Monday that construction spending rose a bigger-than-expected a 0.8 percent in September, fueled by the strongest jump in home construction in six years. The gain in housing offset continued weakness in construction of office buildings, hotels and shopping centers.
In a third report, the National Association of Realtors said the volume of signed contracts to buy previously occupied homes rose 6.1 percent in September, to a reading of 110.1. That's the highest level since December 2006. And it's more than 21 percent above a year ago.
The eighth straight monthly gain came as the housing market rebounds from the worst downturn in decades. The improvement has been aided by federal intervention to lower mortgage rates and bring more buyers into the market. For example, the contracts to buy homes rose as buyers scrambled to qualify for a tax credit for first-time buyers that expires at the end of this month. Congress is moving to extend the credit until April 30.
At the White House, President Barack Obama said the public and private sectors must find more ways to create jobs to continue the recovery. In remarks at the start of a meeting with his economic advisers, Obama credited his stimulus package for recent better economic figures, including the manufacturing boost.
