U.S. manufacturing activity fell short of expectations in October with a gauge of new orders easing to its lowest level since April 2017.
The Institute for Supply Management (ISM) said its index of national factory activity dropped 2.1 percentage points to 57.7 last month from 59.8 in September. A reading above 50 indicates growth in manufacturing, which accounts for about 12 percent of the U.S. economy.
Economists polled by Refinitiv expected the ISM manufacturing index to hit 59 in October. An index tracking new orders registered 57.4 percent, a decrease of 4.4 percentage points from the September reading of 61.8 percent.
“Demand remains moderately strong, with the New Orders Index easing to below 60 percent for the first time since April 2017, the Customers’ Inventories Index remaining low but improving, and the Backlog of Orders Index remaining steady,” Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee, said in a press release. “Consumption softened, with production and employment continuing to expand, but at lower levels compared to September.”
Despite the moderation in the manufacturing numbers, October marked the 114th consecutive month of overall economic growth, according to the Manufacturing ISM report.
The latest read on the health of the manufacturing sector comes amid an ongoing trade dispute between the United States and China as a part of President Donald Trump’s “America First” policy. The White House hopes that it can pressure Beijing into a more favorable trade deal through taxes on Chinese goods.
The president escalated the economic spat in September, imposing tariffs on an additional $200 billion worth of goods from China as of Sept. 24. The next wave of tariffs started at a 10 percent rate before climbing to 25 percent at the start of 2019 if the disagreement between the two nations is not resolved.
The rift has not yet had a major impact on U.S. economic activity, with the first read on third-quarter gross domestic product (GDP) showing growth of 3.5 percent on an annualized rate. The Commerce Department said last month that inflation has remained relatively tame and that consumer spending surged.
Spending on U.S. construction projects was essentially unchanged in September. It is the weakest showing since June, as an increase in home construction was offset by a slide in spending on government projects.
The Commerce Department says that the flat reading for September followed a 0.8 per cent rise in August. Construction spending, meanwhile, was expected to have risen 0.1 percent in September.
The strength last month was driven by a 0.6 per cent increase in residential construction and a smaller 0.1 per cent increase in nonresidential activity, which pushed this category to an all-time high. However, these gains were offset by a 0.9 per cent drop in spending on government projects.
The increase in residential construction featured an 8.7 per cent jump in apartment construction, which offset a 0.8 per cent drop in single-family homes.
— CNBC’s
Thomas Franck
contributed reporting.
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