Manufacturing activity continues to decline in April; construction spending stumbles in March

National factory activity declined more than anticipated in April, slowing amid seasonal factors and underpinned growth in the manufacturing sector due to strong domestic and global economies.

The Institute for Supply Management (ISM) said its index of national factory activity fell to a reading of 57.3 last month from 59.3 in March. The previous month saw a decline in new orders, supporting economists’ view that economic growth slowed in the first quarter.

A reading above 50 in the ISM index indicates growth in manufacturing, which accounts for about 12 percent of the U.S. economy.

The survey’s production sub-index fell 3.8 points to a reading of 57.2 in April. A gauge of new orders dropped to 61.2 last month, from 61.9 in March. A measure of factory employment dropped 3.1 points to 54.2 in March.

Seventeen industries — including fabricated metal products, computer and electronic products, machinery and chemical products — reported growth last month.

Metal fabricators said the recently imposed tariffs on steel “have made it difficult to source material,” adding that it has forced the elimination of “two products due to availability and cost of raw material.” Machinery manufacturers echoed that idea and said that “pricing for steel and other materials increased due to the proposed tariffs.”

Transportation equipment manufacturers were the most positive about April but noted a tightening supply chain and labor market.

“Business if off the charts,” the transportation equipment builders said in the report.

U.S. construction spending unexpectedly fell in March as a sharp decline in home-building
led to the biggest drop in investment in private construction projects in more than seven years.

The Commerce Department said on Tuesday construction spending tumbled 1.7 percent. February data was revised to show construction spending increasing 1.0 percent instead of the
previously reported 0.1 percent gain.

Economists polled by Reuters had forecast construction spending accelerating 0.5 percent in March. Construction spending rose 3.6 percent on a year-on-year basis.

In March, spending on private construction projects declined 2.1 percent. That was the largest fall since January 2011 and followed a 1.2 percent increase in February. Outlays on private residential projects plunged 3.5 percent, the biggest drop since April 2009, after advancing 1.2 percent in February.

Spending on both single and multifamily housing projects fell in March.

Spending on nonresidential structures slipped 0.4 percent in March after surging 1.2 percent in the prior month.

Investment in public construction projects was unchanged last month after edging up 0.1 percent in February. Spending on federal government construction projects jumped 2.2 percent to the highest level since September 2011. That followed a 0.5 percent rise in February.

State and local government construction outlays fell 0.3 percent after being unchanged in February.

– Reuters contributed to this report.