WASHINGTON: US manufacturing activity expanded for a third straight month in May, but growth in new orders continued to slow as factories grappled with sluggish overseas demand and weak capital spending in the energy sector.
Other data yesterday showed construction spending recorded its biggest decline in more than five years in April as spending fell broadly, which could prompt economists to lower their second-quarter growth estimates.
The Institute for Supply Management said its index of national factory activity rose half a percentage point to a reading of 51.3 last month. The hike in the index largely reflected a jump in prices paid by factories for raw materials.
A reading above 50 indicates expansion in manufacturing, which accounts for about 12 percent of the US economy.
Despite signs that the economy is regaining speed in the second quarter, manufacturing remains constrained by the lingering effects of the dollar’s surge and oil price plunge between June 2014 and December 2015.
With the dollar’s rally fading and oil prices steadily rising, there is cautious optimism that manufacturing will eventually find its footing.
Although the ISM index has remained above expansion territory for three consecutive months, so-called hard data on manufacturing has been generally weak.
The government reported last week that orders for long-lasting manufactured capital goods, excluding defense and aircraft, fell in April for a third straight month.
A separate report from the Commerce Department showed construction spending fell 1.8 percent after an upwardly revised 1.5 percent rise in March. April’s fall was the largest since January 2011.
Economists polled by Reuters had forecast construction spending rising 0.6 percent in April after a previously reported 0.3 percent gain in March. Construction outlays rose 4.5 percent from a year ago.
The weak construction report bucked fairly strong April data on consumer spending, industrial production, goods exports and housing.
