Sun, Jul 03, 2016 - Page 16 News List

US factory data, auto sales improve

FOOTNOTE:The US’ growth momentum appears to have rebounded, an economist said, but added that the data were compiled before Britain’s vote to leave the EU


US factory activity expanded at a healthy pace last month as new orders, output and exports rose, industry data showed on Friday, providing another sign that US economic growth was regaining its footing after weakness early this year.

The Institute for Supply Management said its national factory index rose to 53.2 last month, the highest since February last year, from 51.3 in May.

A reading above 50 indicates expansion in the manufacturing sector, which accounts for about 12 percent of the US economy.

Meanwhile, automakers reported higher sales last month amid strong demand for pickup trucks and sport utility vehicles, but on an annualized basis, the industry selling rate came in at 16.66 million units, well below May’s sales pace of 17.45 million.

Ford Motor Co and Fiat Chrysler Automobiles NV reported sales gains of 6.4 percent and 6.5 percent last month, but General Motors Co, Toyota Motor Corp and Volkswagen AG all sold fewer vehicles.

Some analysts say that industry sales might have peaked at 17.45 million units last year, but GM chief economist Mustafa Mohatarem still held out hope for another record year.

“Positive economic indicators like historically low interest rates, stable fuel prices, rising wages and near-full employment provide the environment for strong auto sales to continue in the second half of the year,” Mohatarem said in a statement.

However, the positive for manufacturing and autos was dampened by a second straight monthly drop in construction spending in May.

The US Department of Commerce on Friday said that May construction spending fell 0.8 percent after a downwardly revised 2.0 percent drop in April. The revised April drop was the largest since January 2011.

The weaker construction data could prompt some economists to trim back their second-quarter growth estimates and could help reinforce the US Federal Reserve’s view that there is too much uncertainty over global and US growth to raise interest rates in the near term.

“Net-net it is a certainly a bit of a mixed picture, a mixed bag, but I think in terms of direction, what is evidenced here, is that growth momentum has rebounded,” said Millan Mulraine, deputy chief economist at TD Securities in New York.

He added that a major “asterisk” to the improvement is that the data surveys predate Britain’s vote last week to leave the EU, which has injected a big source of uncertainty to the global growth outlook.

While the IMF anticipates that uncertainty over Britain’s departure from the EU will dampen near-term global growth, it remains unclear how much Brexit might affect US demand.

In addition to its factory index, ISM on Friday released a survey that showed 61 percent of businesses saw a negligible impact from Britain’s EU vote for the remainder of this year.

It showed only 6 percent forecasting a negative impact, and there was little difference between manufacturing and non-manufacturing firms.

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