Manufacturing growth slows, but hiring jumps
WASHINGTON — A survey shows U.S. manufacturing activity expanded more slowly in March than February, held back by weaker growth in production and new orders. But factories hired at the fastest pace in nine months, an encouraging sign ahead of Friday’s report on March employment.
A separate report Monday said construction spending jumped in February as demand for residential real estate continues to grow.
The Institute for Supply Management said Monday that its index of factory activity slipped to 51.3 percent. The index fell from 54.2 percent in February, which was the
fastest growth since June 2011.
A reading above 50 indicates expansion. The index has signaled growth for four straight months. But the drop in March growth was bigger than economists expected.
Jennifer Lee, senior economist at BMO Capital Markets, said in a note to clients that the March decline might be the first sign that companies are worried about federal spending cuts that took effect March 1.
But Joshua Shapiro, chief U.S. economist at MFR Inc., cautioned that the index’s drop last month might just be a onemonth blip. Combined, the institute’s reports for the first three months of 2013 “suggest that the manufacturing sector is now making moderate headway.”
In addition to faster hiring, new export orders grew faster in March than February.
The Institute for Supply Management said the index was consistent with an annual rate of economic growth of 3.3 percent from January through March, up from a tepid 0.4 percent growth rate the last three months of 2012.
Reports Monday showed manufacturing is on the upswing in China and Japan, the second- and third-largest economies in the world.
Growth in China’s manufacturing picked up in March, according to a survey by the China Federation of Logistics and Purchasing. And Japanese manufacturers are more upbeat about business conditions than they were last year, according to the Bank of Japan’s “tankan” index for the March quarter.
The government reported Friday that U.S. consumers increased spending in February as their incomes grew slightly. The University of Michigan’s consumer-sentiment index showed that Americans were feeling more confident about the economy at the end of March.
Underlying the improvement is a strengthening job market. Employers have been adding 200,000 jobs a month since November, twice the pace from last spring. Unemployment fell in February to 7.7 percent, the lowest since December 2008.
Economists expect about the same level of job growth in March.
Construction spending in the U.S. rose in February, paced by the highest level of home building in more than four years, the Commerce Department reported Monday.
Outlays climbed 1.2 percent to an $885.1 billion annual rate, after a 2.1 percent decrease in January.
Near record-low borrowing costs and an improved outlook for jobs are lifting demand for residential real estate, a boon for homebuilders including KB Home. Faster hiring would ensure a more sustained rebound in the industry, allowing for bigger gains in construction spending.
“Housing, growth-wise, will be the best-growing sector of the major sectors in 2013, hands down,” Ken Mayland, president of Clear-View Economics LLC in Pepper Pike, Ohio, said before the report. “I’m totally optimistic about housing’s recovery — there’s an inevitability that it has to go higher.”
Construction spending increased 6.6 percent in the 12 months ended in February before adjusting for seasonal variations.
Private construction spending advanced 1.3 percent from the prior month.
Spending on public construction climbed 0.9 percent from the prior month, the biggest advance since August. State and local agencies led the advance, while federal outlays dropped 1.1 percent, a second-consecutive decrease.
Recent reports indicate a pickup in demand for housing. Sales of new homes in February capped the best two backto-back months in more than four years, the Commerce Department reported last week. Builders began work on more houses in February, and permits for future construction climbed to an annual pace of 917,000, the highest level in almost five years, pointing to a sustained rebound that will help power the U.S. expansion.
KB Home is among companies buying land in anticipation of increased demand. The Los Angeles-based builder nearly doubled its spending, to almost $350 million, on land acquisition and development in the first quarter, and has been raising prices, Chief Executive Officer Jeffrey Mezger said.