US manufacturing recovers in Nov on brisk demand
Construction spending down 0.1% in October
WASHINGTON, Dec 3, (Agencies): The US manufacturing sector recovered in November, rising from a six-month low on strong demand and as trade war anxieties eased somewhat, according to an industry survey released Monday.
The rosy numbers did not reflect the trade truce announced over the weekend by Washington and Beijing, who agreed to halt further escalations in their tariff battles.
The Institute for Supply Management’s manufacturing index unexpectedly rose 1.6 points from October’s reading to 59.3, though it was still lower than September’s level.
As in Oct 13 of 18 industries reported expansion and three reported contraction: primary metals, non-metallic minerals and printing.
New orders jumped 4.7 points to 62.1 percent and the indices for employment and inventories also rose.
Timothy Fiore, chairman of the ISM manufacturing survey committee, told reporters that Saturday’s announcement at the Group of 20 summit in Argentina would likely offer some relief to manufacturers – who had ramped up imports to beat an expected January 1 increase in duty rates on many Chinese goods.
“This is definitely going to provide some relief on that. I don’t think this is really a relaxation. It’s a pretty much a confirmation of the status quo,” he said.
The share of survey respondents who expressed concerns about tariffs – which have driven up input costs, destabilized supply chains and raised prices continued to be high but fell below the 40 percent recorded in the prior five months.
Respondents in the chemical products and fabricated metals sectors complained of labor shortages as well.
Fiore said the stronger demand boded well for the start of 2019, but acknowledged the current manufacturing expansion may have peaked.
Ian Shepherdson of Pantheon Macroeconomics noted that export orders remained at a two-year low and had not recovered from October’s decline.
Solid
“Overall, this is a very solid ISM, and something of a relief after October’s weakness, but real risks remain,” he said in a client note.
In a seperate report, spending on US construction projects fell 0.1% in October, the third consecutive monthly decline, as weakness in home building and non-residential construction offset a rebound in government projects.
The October decline matched a similar 0.1% drop in September and followed a 0.4% fall in August, the Commerce Department reported Monday. Construction has been weak since peaking in May with declines in four of the five months since that time, reflecting in large part the challenging facing home builders. Home builders have struggled all year with rising costs for lumber, land and workers. Mortgage rates are also rising, reflecting in part rate hikes by the Federal Reserve, which has boosted its benchmark rate three times this year and is expected to hike rates for a fourth time later this month.
In October, home building fell 0.5%, while non-residential construction retreated 0.3% as declines in construction of medical facilities and shopping centers offset a gain in office construction. Government spending was up 0.8% in October, a rebound that reflected gains in both state and local projects and federal spending.
The National Association for Business Economics released a new economic outlook Monday in which its forecasting panel downgraded estimates for home construction for this year and next year. It projects that builders will start construction on 1.26 million homes in 2018, down from their forecast in October for 1.28 million housing starts this year.
The revised forecast would still be a 5% increase from the 1.2 million housing starts in 2017. For 2019, the forecast expects starts will rise to 1.3 million units, a reduction of 50,000 units from NABE’s October survey.