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Economic Watch: Manufacturing Growth Continues, Construction Spending Slows

March 2, 2015

By Evan Lockridge

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Growth continued in the U.S. manufacturing sector during February, according to two separate reports released Monday, but they showed different trends.

The nation’s supply executives say manufacturing expanded for the 26th consecutive month in the latest report from the Institute for Supply Management. The February Purchasing Managers Index registered 52.9%, down 0.6 of a percentage point from January’s reading of 53.5%.

A reading above 50 indicates manufacturing is expanding.

The New Orders Index registered 52.5%, a decrease of 0.4 of a percentage point from the reading of 52.9% in January, while the Production Index registered 53.7%, 2.8 percentage points below the January reading of 56.5%.

Of the 18 manufacturing industries, 12 reported growth in February.

Meantime, a separate report shows growth in the U.S. manufacturing sector gathered momentum in February, with output and new orders both rising at sharper rates than seen at the start of the year.

The final seasonally adjusted U.S. Manufacturing Purchasing Managers’ Index, from the financial information services provider Markit, rose to 55.1 in February from 53.9 in the previous month.

The reading signaled the most marked improvement in business conditions in the sector since October 2014, according to the report.

“Manufacturing production growth quickened to the sharpest in four months during February, with firms linking higher output to increases in new business,” the report said. “This was highlighted by a marked rise in total new orders. As with production, the rate of growth in new business was the fastest since last October. Meanwhile, new export orders continued to rise, though only modestly.

“Manufacturing braved the cold weather in February, reporting an upturn in the pace of growth. A flurry of activity towards the month end helped raise production to a greater extent than signaled by the earlier flash reading,” said Chris Williamson, chief economist at Markit. “The upbeat survey points to minimal impact from the adverse weather that affected many parts of the country during the month.”

He said while growth of manufacturing output remained below the peaks seen last year, the survey is broadly consistent with production rising at an annualized rate approaching 4%.

“Employment continued to rise, albeit with the rate of job creation slipping as many companies cited increased uncertainty about the outlook, especially with the strong dollar hitting competitiveness” Williamson said.

Finally, a third report showed construction spending in the U.S. during January fell 1.1% below December’s revised rate, according to the Commerce Department, but increased 1.8% from the same time a year earlier.

Spending on private construction fell 0.5% in January from December’s revised level. This includes a 0.6% increase in residential construction and a 1.6% drop in nonresidential building.

In the public construction sector, January activity declined 2.6% from December’s revised level.

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