Manufacturing Growth Recedes for Fifth Month
U.S. manufacturing growth slowed in April for the fifth straight month, but economists said the further evidence of an economic soft patch was not likely to deter the Federal Reserve from raising interest rates.
Data from the Institute for Supply Management on Monday showed the industry group’s index of national factory activity fell to 53.3 in April from 55.2 in March. Wall Street analysts had predicted that the survey would show little change.
The April index receded to the lowest level since July 2003. However, a reading above 50 indicates that the factory sector is growing, which it has done for nearly two years.
“The jury is still out on the depth and size of the soft patch in the economy due to the jump in oil prices, and these reports do not answer that question decisively,” said Lynn Reaser, chief economist at Banc of America Capital Management in Boston.
The prices-paid portion of the index slipped to 71 from 73. But economists said that prices remained strong and that the Fed would continue to focus on inflation over evidence of a slowing economy when considering its rate policy today.
“There is still quite a bit of price pressure coming from commodity price increases -- the Fed is still on track on raising rates,” Reaser said.
The Fed is widely expected to raise official interest rates by a quarter-point to 3%.
Analysts also studied the employment component of the manufacturing data for clues to Friday’s April nonfarm payrolls report.
The employment index slipped to 52.3 from 53.3 in March, which could temper talk of a sizable gain in April payrolls. Analysts on average are expecting a rise of 170,000 jobs from 110,000 in March.
Another report Monday showed U.S. construction spending jumped a surprisingly large 0.5% to a record high in March as home building hit record levels.
Construction outlays climbed to a seasonally adjusted annual rate of $1.052 trillion from a revised $1.047 trillion in February, the Commerce Department said. Wall Street analysts had expected a 0.3% gain.
Total private construction rose 0.5% to $816 billion from $811 billion the previous month, while private residential construction climbed 0.3% to $585 billion from a revised $584 billion in February. Both figures were record highs.
