Sun. Jan 26th, 2020

Factory production in the United States, construction costs dropped abruptly

WASHINGTON: In November, US factory activity continued to contract amid a slump in new orders, while construction expenditure dropped unexpectedly, offering cautionary notes on an economy that had recently shown signs of moderate growth.

Monday’s results came on the heels of positive October information on the trade deficit, employment, and manufactured products which prompted analysts to raise their forecasts for the fourth quarter of their gross domestic product.

The Supply Management Institute (ISM) said its national factory activity index fell 0.2 points last month to a 48.1 reading. A reading below 50 shows a contraction in the manufacturing sector, which represents 11% of the U.S. economy.

To signal a recession in the wider economy, the ISM index needs to break below the 42.9 level. The index had been forecast by economists polled by Reuters to rise to 49.2 in November from 48.3 in the previous month.

While the ISM said market morale had strengthened, presumably as the U.S. and China inch towards a tentative trade deal, the reading from November marked the fourth straight month the index stayed below the 50 thresholds.

A continued contraction in production could put the Federal Reserve in a difficult position of policy. A calculation of export orders fell to 47.9 by 2.5 percent. The factory employment index of the survey fell 1.1 points last month to a reading of 46.6.

The dollar was trading against a currency basket, while the U.S. Prices of the treasury have risen. Wall Street prices have fallen.

The Commerce Department said infrastructure spending dropped by 0.8 percent in a separate report on Monday as an investment in private projects plummeted to its lowest level in three years. September data was updated to show construction outlays falling by 0.3 percent instead of increasing by 0.5 percent as reported previously.

Economists expect a 0.4 percent increase in infrastructure spending in October. In October, infrastructure spending rose by 1.1% year-on-year.

Spending on private construction projects dropped 1.0 percent to $956.3 billion in October, the lowest level since October 2016, after a 1.1 percent decline in September. It was held down by a decline of 0.9 percent in spending on private housing projects. In September, outlays on residential construction dropped by 1.1 percent.

Despite lower mortgage rates, the second straight monthly fall in residential construction.