US manufacturing sector growth eases in October

NEW YORK: The pace of growth in the US manufacturing sector unexpectedly slowed in October, in line with trends in China, Britain and Canada in data reported on Tuesday.

The Institute for Supply Management said its index of national factory activity dipped to 50.8 from 51.6 the month before, coming in below forecasts for an improvement to 52.0, according to a Reuters poll of economists.

A reading below 50 indicates contraction in the manufacturing sector, while a number above 50 means expansion.

New orders rose to 52.4 from 49.6, while the prices paid index fell to its lowest since April 2009 at 41.0 from 56.0. The employment index eased to 53.5 from 53.8.

"There is no question that manufacturing activity has slowed a bit in response to the weakness that we are seeing out of Europe," said Mark Vitner, senior economist at Wells Fargo Securities in Charlotte, North Carolina.

"What this report really highlights is that the economy is really still stuck in slow growth mode and we are unlikely to shake that any time soon."

The slowdown in the US manufacturing sector followed data on Tuesday showing similar trends in Canada, Britain and China suggesting the pace of economic growth is continuing to slow.

Factory activity in Asia's big export economies slowed to its weakest rate in nearly three years in October, while a sharp decline in British manufacturing provided the latest sign that Europe is on the brink of recession.

"We're starting to see a broader slowdown globally. You had global activity moving along at a reasonable pace but that's starting to fade," said Tom Porcelli, chief economist at RBC Capital Markets in New York.

In other US data on Tuesday, growth in US construction spending slowed in September as governments cut back on building and maintaining schools and public transportation, a government report showed.

Total construction spending rose 0.2 percent to an annual rate of $787.21 billion, the Commerce Department said.

Economists polled by Reuters had forecast a 0.3 percent increase after August construction spending rose by an upwardly revised 1.6 percent.

Spending on public construction fell 0.6 percent in September, with cuts felt across government departments from healthcare and schools to public safety and conservation.

Federal spending dropped 6.8 percent, its steepest decline since December of last year. State and local outlays edged up 0.1 percent.

In the private sector, construction spending rose 0.6 percent, with residential spending up 0.9 percent and nonresidential spending up 0.3 percent.

Total construction spending was down 1.3 percent from September of last year, hurt by a 9.2 percent decline in public sector outlays. Private spending was up 3.9 percent on the year.

Copyright Reuters, 2011