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Economy up slightly, but threats remain

WASHINGTON — The nation’s economy is managing to grow modestly, reports Monday showed, despite high U.S. unemployment and growing alarm about Europe’s debt crisis.

Manufacturing expanded in September more than in August, though the pace of growth remains weak, according to a survey by the Institute for Supply Management. The ISM said its manufacturing index rose for the first time in three months.

And construction spending increased in August, the government said. The gain was due mostly to a pickup in state and local government projects.

In addition, U.S. auto sales rose in September, largely because consumers bought more pickups and SUVs, U.S. automakers said.

Collectively, the reports suggested the U.S. economy may be able to avoid another recession but will continue to struggle.

Economists said the manufacturing and construction reports are consistent with an annual growth rate of about 2 percent to 2.5 percent for the July-September quarter.

That would be an improvement from growth of about 0.9 percent in the first six months of the year. But it wouldn’t be enough to reduce the unemployment rate, which is 9.1 percent.

The reports are “mildly encouraging,” said Paul Ashworth, chief U.S. economist at Capital Economics. “But even if the U.S. avoids a recession, economic growth is going to remain lackluster.”

One sign that it will came from the manufacturing report. Manufacturing executives said their volume of U.S. orders shrank for the third straight month. That doesn’t bode well for future production.

Export orders did grow at a faster pace last month than in August, the report found. But some reports Monday suggested the global economy is slowing. A purchasing managers’ report for the 17 countries that use the euro showed manufacturing is contracting in that region.

And the auto industry’s gains may be temporary, economists said. Sales and production slowed over the summer after the March 11 earthquake in Japan. Recent increases likely reflect the end of supply disruptions stemming from that disaster.

Twelve of the 18 manufacturing industries tracked by the ISM reported growth in September. They include food and beverages; clothing; autos and other transportation equipment; and chemicals. Furniture, paper products, and electrical equipment were among those that contracted.

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