The closely watched National Association of Purchasing Managers index of manufacturing conditions was up 0.1 to 43.2 in April. Separately, the Census Bureau reported that construction spending in March increased strongly, up 1.3% from February after seasonal adjustment.
The NAPM index has been stuck in the 42-44 range for five months. Within the overall index, prices and inventory buying both weakened again, confirming that surplus inventory is being worked off; while the orders sub-index rose from 42.3 to 45.9, promising a spring rise in the overall index. The report should be interpreted as evidence that heavy manufacturing is still declining slowly, since these manufacturers dominate the survey panel. The less cyclical packaged goods manufacturers are likely doing slightly better.
The Fed's January cuts in credit costs are already paying off in the construction market. The last two rate cuts have yet to impact the market. Inflation-adjusted spending has risen for five consecutive months. March spending was 5.2% above last July, when interest rates were more than a percentage point higher. As expected, cheaper credit has had the most impact on housing and office buildings.
Spending on industrial buildings jumped 3.1% in March to 9.1% above last July. Apparently manufacturers consider the current sales decline temporary and are still adding capacity, especially semiconductor manufacturers.
Office construction spending climbed 7.2% in March to about 20% higher than early 2000. Developers are taking advantage of cheap credit to add space in low vacancy rate markets even as the overall vacancy rate rises.
Unrelated to economic conditions, highway construction spending is now rising briskly, up 3.3% in March, as the bureaucrats begin the release of the large increase in federal funding that Congress voted several years ago.