WRAPUP 2-US manufacturing expands; pending home sales surge

(Recasts, adds global data, auto sales data, updates stock market)

By John Parry

NEW YORK Dec 1 (Reuters) - The U.S. manufacturing sector grew for the fourth straight month in November and pending home sales hit a 3-1/2-year high in October, reports on Tuesday showed, though there were indications the economic recovery will be slow.

Manufacturing growth slowed in November from prior months, according to a report from the Institute of Supply Management, and government data showed that U.S. construction spending was flat in October.

The Institute for Supply Management's index of national factory activity fell to 53.6 in November from 55.7 in October, but was still above the 50 mark that separates expansion from contraction. The median forecast of 70 economists surveyed by Reuters was for a reading of 55.0 in November.

The ISM report was "a bit less-than-expected but overall still a strong number when added to the previous monthly levels that were greater than 50," said Tom Sowanick, chief investment officer with the Omnivest Group in Princeton, New Jersey.

"Note that the China ISM was also up last night, which confirms that we are in a global recovery," Sowanick added.

In another sign of the global recovery, a survey by JPMorgan released on Tuesday showed that global factory business activity grew for a fifth straight month in November, though more slowly than in October as growth eased sharply in Japan. [ID:nGEE5B01UY].

The labor market remains a weak spot, with the ISM employment index for the U.S. manufacturing industry falling to 50.8 in November from a 2-1/2-year high in in October of 53.1.

"Given the number of manufacturing jobs lost and the number of facilities closed, rarely are those reopened. It will take more growth than we're seeing right now to create significant growth in manufacturing jobs," said Norbert Ore, chairman of the ISM manufacturing business survey committee in Atlanta.

New manufacturing orders rose to 60.3 in November from a 58.5 reading in October.

Some economists warn that even though the brisk rebound of new orders hints that capital spending will recover, companies may not ramp up spending much because of the depressed level of industrial output.

U.S. auto sales for November reported on Tuesday gave another reading on the manufacturing sector and economy. Sales edged higher in November, led by an out-sized gain for Hyundai Motor Co. and mixed results for rivals.

Ford Motor Co., the only U.S. automaker to have avoided a taxpayer-funded bankruptcy restructuring, reported flat sales, but said it expects its North American production in the first quarter to rise by 58 percent over the extremely weak year-earlier period.

U.S. auto sales in November, on an adjusted basis, rose to an annualized rate of 11 million units, up from a rate of 10.43 million units in October.

Other data on Tuesday pointing to recovery showed more evidence that the U.S. housing market is emerging from a three-year slump.

The National Association of Realtors said its Pending Home Sales Index, which reflects contracts signed in October but not yet closed, rose for a ninth straight month, marking the longest streak of gains since the series started in 2001. The index was up 3.7 percent in October to a reading of 114.1. [ID:nN01495024].

Recovery is being supported by the popular $8,000 tax credit for first-time buyers, low mortgage rates, and falling house prices. The tax credit, which had been due to expire on Nov. 30, has been extended into next year, and the government also added a $6,500 credit for home owners buying a new residence.

The positive news on the housing market, which is considered central to any economic recovery, helped U.S. stocks gain, with the Dow Jones industrial average .DJI rising 1.2 percent to hit a 14-month closing high.

But even as rising sales indicated a housing market recovery, the Commerce Department reported that U.S. construction spending was flat overall in October at $910.8 billion. The Commerce Department report also sharply revised downward prior month data. [ID:nN01482360].

September construction spending, which originally had been reported to have risen by 0.8 percent, actually slumped by 1.6 percent, the government said, the sharpest fall since a 2.8 percent decline last January.

Spending on homebuilding was up 4.4 percent in October, more than recovering from a 2.0 percent dip in September. It was the biggest monthly gain in private residential spending since a matching 4.4 percent rise in March 1998. (Additional reporting by Jennifer Ablan, Ellen Freilich, Lucia Mutikani and Glenn Somerville; Editing by Leslie Adler) ((John.Parry@thomsonreuters.com ; +1 646 223 6303; Reuters Messaging: john.parry.reuters.com@reuters.net))