US factory activity expands in April

US manufacturing activity rose for a second straight month in April but at a slightly slower pace, as new orders and production fell.

The Institute for Supply Management (ISM) said on Monday its index of national factory activity slipped to 50.8 last month from a reading of 51.8 in March. A reading above 50 indicates expansion in the manufacturing sector. A gauge of orders received by factories fell 2.5 points to 55.8 per cent.

Manufacturing, which accounts for about 12 per cent of the US economy, has been hurt by weak export growth stemming from a strong dollar and soft global demand.
 

The sector has also been hammered by relentless aggressive spending cuts in the energy sector in the aftermath of last year's plunge in oil prices. Efforts by businesses to reduce an inventory overhang have resulted in fewer orders being placed with factories, causing further erosion of manufacturing.

Economic growth slowed to a 0.5 per cent annualised rate in the first quarter. Given a fairly robust labour market, which is expected to boost sluggish consumer spending, economists expect gross domestic product growth to rebound in the second quarter. The economy grew at a 1.4 per cent rate in the fourth quarter. Prices for US Treasuries fell after the data, as did the dollar against a basket of currencies. US stocks were trading higher.

A second report from the Commerce Department showed construction spending rose to an 8-1/2-year high in March and the prior month's outlays were revised higher, pointing to sustained strength in the sector despite a sharp downturn in spending by energy firms.

Construction spending increased 0.3 per cent to the highest level since October 2007, following an upwardly revised 1.0 per cent jump in February, the Commerce Department said on Monday.

Economists polled by Reuters had forecast construction spending rising 0.5 per cent in March after a previously reported 0.5 per cent decline in February. Construction outlays were up 8.0 per cent from a year ago. Though February's outlays were revised higher, construction spending for January was revised down to show a 0.3 per cent drop instead of the previously reported 2.1 per cent increase. In March, construction spending was supported by a 1.1 per cent surge in private construction, which hit its highest level since October 2007. Outlays on private residential construction increased 1.6 per cent. Spending on private non-residential structures, which also includes factories and offices, advanced 0.7 per cent to its highest level since October 2008.

Public construction spending fell 1.9 per cent in March as outlays on state and local government construction projects, the largest portion of the public sector segment, declined 1.4 per cent.

Federal government construction spending tumbled 7.4 per cent in March.