March’s outlays to build up 0.3%
April index rises in manufacturing
WASHINGTON — U. S. construction spending advanced in March to its highest level in more than eight years, the Commerce Department said. Gains in homebuilding and nonresidential construction offset a drop in government projects.
A second economic report Monday from the Institute for Supply Management said U. S. manufacturing expanded in April for the second- straight month, suggesting that factories are adapting to a strong dollar and economic weakness overseas, according to a private survey.
Construction spending rose 0.3 percent in March after a 1 percent gain in February, the Commerce Department said. The backtoback increases raised total spending to a seasonally adjusted annual rate of $ 1.14 trillion, the highest level since October 2007.
The February increase represented an upward revision by the government from its initial estimate that such spending had fallen 0.5 percent that month. But the estimate for January was revised down by the government to show a drop of 0.3 percent, from a previously
reported increase of 2.1 percent.
The report showed that “the housing market remained robust” through the first quarter of the year, said Jesse Hurwitz, an economist at Barclays Research.
Last year, home construction was a bright spot for the U. S. economy, and that support is expected to continue through 2016.
Residential construction grew at a 14.8 percent annual pace in the first three months of the year. It was one of the few sources of strength in a quarter in which the economy grew at an annual rate of just 0.5 percent — the slowest pace in two years.
Hurwitz said Barclays thinks that the government will revise up its estimate of the economy’s growth last quarter to a 0.7 percent annual rate on the basis of economic data released in recent days. The government will issue its revised estimate on May 27.
In March, home construction increased at a 1.6 percent annual rate, and nonresidential construction increased 0.7 percent. Spending on government projects dropped 1.9 percent, with both state and local and federal spending falling.
The Institute for Supply Management said its manufacturing index came in at 50.8 last month, down from March’s 51.8 reading but above the 50 threshold that signals growth. The March number had snapped a fivemonth losing streak for manufacturers.
Export orders grew faster in April. Still, the index came in below economists’ expectations, and new orders and production grew more slowly last month than they did in March. A measure of employment fell, suggesting that factories are cutting workers.
Eleven of 18 manufacturing industries reported growth last month, and 15 reported increases in new orders and production. “This morning’s report brings another welcome sign of stabilization for the US manufacturing sector,” Barclays economist Rob Martin wrote in a research report.
“Manufacturing continues to muddle through at a very low growth rate,” Brett Ryan, U. S. economist at Deutsche Bank Securities Inc. in New York, said before the report. “We’re dealing with the lagged impact of what previous dollar appreciation has done, and added to that we have a domestic inventory overhang, and that’s just going to keep manufacturing kind of on the sidelines.”
The dollar surged last year but has fallen since January, giving American factories some relief. A strong dollar makes U. S. goods more expensive in foreign markets. Bradley Holcomb, chairman of Institute for Supply Management’s manufacturing survey committee, expects manufacturing to show resiliency “if the dollar continues to behave itself.”
The institute, a trade group of purchasing managers, surveys about 200 U. S. companies each month.
Last week, the Commerce Department reported that orders to U. S. factories for longlasting goods rose in March, rebounding from a drop in February. But the gain was generated by rising demand for military equipment, a volatile category. Excluding defense, durable goods orders dropped 1 percent in March.
The American economy has drawn more strength from services than manufacturing. The institute’s services index has come in above 50 every month since January 2010.