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Manufacturing Up, Construction Spending Slides

Manufacturing posted its fifth consecutive monthly increase during June while construction spending fell during May

by Staff
July 1, 2002
2 min to read


Manufacturing posted its fifth consecutive monthly increase during June while construction spending fell during May.

The Institute for Supply Management reported Monday its monthly manufacturing index rose from 55.7 in May to 56.2 in June, the fastest pace since February 2000.
The figure is encouraging because a reading above 50 indicates expansion while one below 50 indicates contraction.
Production rose strongly to 61.4 after averaging 58.1 over the previous three months. Similarly, employment increased to 49.7 from a 47.1 average in the previous three months.
“Together this suggests a significant pickup among manufacturers in June,” says Newport Communications Senior Economist Jim Haughey.
“This is confirmed by a large rise in the price index, up from 63.0 to 65.5, and also by another pickup in export orders to 54.5 from 53.3,” he says. “Comparing the production index to the export orders index suggests that foreign manufacturers are four to five months behind their U.S. counterparts in this recovery. Notably, manufacturers report that the declining U.S. dollar is now getting them foreign orders where they were not price competitive a few months ago.”
In a separate report from the Commerce Department, the value of construction spending fell 0.7% in May after hitting a record level the month before.
Private nonresidential construction dropped 3.1%, while private residential building fell 0.8%.
Haughey says the warm winter had boosted spending substantially in January through March, so activity in the spring has been slightly weaker because some projects were finished early.
The construction outlook is for a 2-3% drop in activity over the next 12 months, Haughey says. Declines began a few months ago for spending on office buildings and will spread to other commercial building and public projects soon. Housing and remodeling are expected to be steady.
Haughey predicts this outlook means a small dip in construction-related freight until next summer. But with most contractors operating profitably at a high level of activity, truck and equipment purchases will be improving slowly.

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