September's manufacturing expansion less than predicted
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Manufacturing News, Source : The Manufacturer US
Published : 02 Oct 2006 18:39
US manufacturing expanded last month, but less than was forecast, according to Bloomberg. Instead, factories trimmed payrolls and reduced inventories, contributing to an overall slowdown in the economy.
The manufacturing index of the Institute for Supply Management (ISM) fell to 52.9, the lowest level since May 2005. An index reading greater than 50 signals expansion, and the ISM index has averaged 54.9 this year. It was predicted to fall to 53.5 from 54.5 the previous month, based on the median of 64 forecasts in a Bloomberg News survey.
A separate Commerce Department report showed spending on residential construction dropping for the fifth consecutive month.
Manufacturers are cutting back as housing and consumer spending slow down, imparting little momentum to the economy as it enters the crucial fourth quarter. The report also showed price increases moderated, which seems to bear out the Federal Reserve's forecast that slower growth will help control inflation.
"There has been a rise in business caution in the last couple of weeks," said Gary Bigg, economist at Banc of America Securities in New York. "We see the economy growing below average.'' The Fed's policy "will be unchanged at least through the middle of next year," he said.
The ISM, based in Tempe, Ariz., surveys over 400 companies in 20 industries including clothing, furniture, plastics, printing, and transportation to compile the index.
Private home construction spending fell by 1.5 percent in August following a 2.1 percent decline, the Commerce Department report said. Increased investment in factories, hospitals, and office buildings resulted in a 0.3 percent rise in total construction spending for the month.
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