US man­u­fac­tur­ing barely ex­panded last month


U.S. man­u­fac­tur­ers ex­panded at their slow­est pace in two years last month, held back by fal­ter­ing global growth and cut­backs in oil and gas drilling.

The In­sti­tute for Sup­ply Man­age­ment says its in­dex of fac­tory ac­tiv­ity fell sharply to 50.2 in Septem­ber from 51.1 in Au­gust. That is the low­est level since May 2013. Any read­ing above 50 in­di­cates ex­pan­sion.

New or­ders and pro­duc­tion both fell sharply and a mea­sure of hir­ing also de­clined, ac­cord­ing to the ISM, a trade group of pur­chas­ing man­agers. All three still barely re­mained in ex­pan­sion ter­ri­tory.

U.S. man­u­fac­tur­ers are get­ting hit by slower growth in China, the world’s sec­ond-largest econ­omy, and a stronger dol­lar, which makes U.S. goods more ex­pen­sive over­seas. The 15 per­cent rise in the dol­lar’s value in the past year has also made im­ports cheaper com­pared with U.S.-made goods. Oil and gas drillers are also cut­ting back on their or­ders for steel pipe and other goods in the wake of sharply lower oil prices.

The re­port “is yet another il­lus­tra­tion of the dev­as­tat­ing im­pact that the strong dol­lar and weak for­eign de­mand is hav­ing on the bat­tered fac­tory sec­tor,” Steve Mur­phy, an economist at Cap­i­tal Eco­nom­ics, said. “Things might well get even worse be­fore they be­gin to get bet­ter. Nev­er­the­less, the ... in­com­ing data on the rest of the econ­omy are still in­cred­i­bly up­beat.”

Sales of ex­ist­ing homes reached an eight-year high in July be­fore slip­ping in Au­gust. Amer­i­cans are also get­ting more con­fi­dent in the econ­omy and con­sumer spend­ing has been solid.

Yet China’s fac­tory ac­tiv­ity con­tracted again last month, ac­cord­ing to a sur­vey of its pur­chas­ing man­agers. Its man­u­fac­tur­ing in­dex inched up to 49.8 from 49.7 in Au­gust.

The weak­ness in U.S. man­u­fac­tur­ing was wide­spread. Only seven in­dus­tries out of 18 tracked by the in­dex ac­tu­ally re­ported growth, in­clud­ing print­ing, tex­tiles, fur­ni­ture, food and bev­er­ages, pa­per prod­ucts and min­er­als. The 11 that shrank in­cluded steel and other met­als, cloth­ing, oil and coal prod­ucts, wood prod­ucts, elec­tri­cal equip­ment and ap­pli­ances, ma­chin­ery, and com­put­ers.

Man­u­fac­tur­ers cut 15,000 jobs last month, the most in five years, pay­roll ser­vices provider ADP said Wed­nes­day. The gov­ern­ment will re­lease its jobs re­port Fri­day, and econ­o­mists forecast it will show that the econ­omy added 206,000 jobs over­all. The un­em­ploy­ment rate is ex­pected to re­main at a seven-year low of 5.1 per­cent.

Most econ­o­mists ex­pect U.S. man­u­fac­tur­ing will do lit­tle for the econ­omy for the rest of the year, with the pos­si­ble ex­cep­tion of au­tomak­ers. But so far, healthy con­sumer spend­ing on cars, homes and res­tau­rant meals is off­set­ting over­seas weak­ness and driv­ing mod­est growth.

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