US fac­tory ac­tiv­ity ex­pands, con­struc­tion spend­ing falls Man­u­fac­tur­ing em­ploy­ment, pro­duc­tion pick up

Kuwait Times - - BUSINESS -

US fac­tory ac­tiv­ity in­creased for a sec­ond straight month in Oc­to­ber amid a pickup in pro­duc­tion and hir­ing, sup­port­ing views man­u­fac­tur­ing would re­gain some mo­men­tum in the fourth quar­ter.

The In­sti­tute for Sup­ply Man­age­ment (ISM) yes­ter­day said its in­dex of na­tional fac­tory ac­tiv­ity rose 0.4 per­cent­age point to a read­ing of 51.9 per­cent last month. A read­ing above 50 in­di­cates an ex­pan­sion in man­u­fac­tur­ing, which ac­counts for about 12 per­cent of the US econ­omy.

The pro­duc­tion sub-in­dex gained 1.8 per­cent­age points to 54.6. But a gauge of new or­ders slipped to a read­ing of 52.1 from 55.1 in Septem­ber, sug­gest­ing any fu­ture gains in man­u­fac­tur­ing ac­tiv­ity would be mod­est. A mea­sure of fac­tory em­ploy­ment jumped 3.2 per­cent­age points to a read­ing of 52.9. The data came as Fed­eral Re­serve of­fi­cials gath­ered for a two-day meet­ing to de­lib­er­ate on mon­e­tary pol­icy. The US cen­tral bank is not ex­pected to raise rates at the end the meet­ing to­day, which comes less than a week be­fore the Nov. 8 pres­i­den­tial elec­tion, but is ex­pected to do so in De­cem­ber.

Man­u­fac­tur­ing has been ham­strung by the lin­ger­ing ef­fects of the dol­lar’s surge be­tween June 2014 and De­cem­ber 2015, which has con­strained ex­ports. The col­lapse in oil drilling ac­tiv­ity in the af­ter­math of a plunge in oil prices has also weighed on fac­to­ries. That has con­trib­uted to busi­ness spend­ing on equip­ment de­clin­ing for four straight quar­ters.


While there are signs that a turn­around may be im­mi­nent, any gains in man­u­fac­tur­ing will likely be mild. Heavy ma­chin­ery maker Cater­pil­lar last week re­ported a 49 per­cent drop in third-quar­ter profit from a year ago and low­ered its full-year rev­enue out- look for the sec­ond time this year. Cater­pil­lar said de­mand for new heavy ma­chin­ery had been un­der­cut by an “abun­dance” of used con­struc­tion equip­ment, a “sub­stan­tial” num­ber of idle lo­co­mo­tives and a “sig­nif­i­cant” num­ber of idle min­ing trucks.

Last month, 10 man­u­fac­tur­ing in­dus­tries, in­clud­ing non­metal­lic min­eral prod­ucts, fur­ni­ture, and com­puter and elec­tronic prod­ucts re­ported growth. The eight in­dus­tries re­port­ing con­trac­tion in Oc­to­ber in­cluded wood prod­ucts, ap­parel and pri­mary met­als.

US fi­nan­cial mar­kets were lit­tle moved by the data. In a sep­a­rate re­port yes­ter­day, the Com­merce Depart­ment said con­struc­tion spend­ing slipped 0.4 per­cent af­ter an up­wardly re­vised 0.5 per­cent drop in Au­gust. Con­struc­tion out­lays were down 0.2 per­cent from a year ago.

Econ­o­mists polled by Reuters had fore­cast con­struc­tion spend­ing ris­ing 0.5 per­cent in Septem­ber af­ter a pre­vi­ously re­ported 0.7 per­cent drop in Au­gust. July’s out­lays were re­vised up to show them ris­ing 0.5 per­cent in­stead of fall­ing 0.3 per­cent as pre­vi­ously re­ported.

Spend­ing on pri­vate con­struc­tion projects dipped 0.2 per­cent in Septem­ber, with out­lays on res­i­den­tial con­struc­tion ris­ing 0.5 per­cent af­ter fall­ing 1.2 per­cent in Au­gust. The govern­ment re­ported on Fri­day that res­i­den­tial con­struc­tion was a drag on eco­nomic growth in the third quar­ter.

Spend­ing on pri­vate non­res­i­den­tial struc­tures, which in­cludes fac­to­ries, hos­pi­tals and roads, tum­bled 1.0 per­cent in Septem­ber, the largest drop since De­cem­ber 2015, af­ter ris­ing 0.5 per­cent the prior month. In­vest­ment in non­res­i­den­tial struc­tures con­trib­uted to the econ­omy’s 2.9 per­cent an­nu­al­ized growth rate in the third quar­ter.

Pub­lic con­struc­tion spend­ing de­clined 0.9 per­cent in Septem­ber, fall­ing to its low­est level since March 2014. Out­lays on state and lo­cal govern­ment con­struc­tion projects fell 0.8 per­cent, de­clin­ing for a third straight month. Fed­eral govern­ment con­struc­tion spend­ing tum­bled 1.9 per­cent af­ter surg­ing 4.8 per­cent in Au­gust. —Reuters

MO­BILE: This file photo taken on Septem­ber 13, 2015 shows the tail end of an Air­bus A321 at the Air­bus man­u­fac­tur­ing fa­cil­ity in Mo­bile, Alabama. —AFP

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