A survey shows US manufacturing activity expanded more slowly last month than February, held back by weaker growth in production and new orders, but that factories hired at their fastest pace in nine months, an encouraging sign ahead of Friday’s report on last month’s employment.
The US Institute for Supply Management on Monday said that its index of factory activity slipped to 51.3 percent from 54.2 percent in February, which was the fastest growth since June 2011.
A reading above 50 indicates expansion. The index has signaled growth for four straight months, but the drop in growth last month was bigger than economists expected.
BMO Capital Markets senior economist Jennifer Lee said in a note to clients that last month’s decline might be the first sign that companies are worried about federal spending cuts that took effect on March 1.
However, MFR Inc chief US economist Joshua Shapiro cautioned that the index’s drop last month might just be a one-month blip. Combined, the institute’s reports for the first three months of this year “suggest that the manufacturing sector is now making moderate headway,” he said.
In addition to faster hiring, new export orders grew faster last month than in February.
The institute said that the index was consistent with an annual 3.3 percent rate of economic growth seen from January through last month, up from a tepid 0.4 percent growth rate the last three months of last year.
The US’ economy has proven surprisingly resilient in the face of tax increases that took effect in January and the federal budget cuts.
The US government on Friday reported that consumers increased spending in February as their incomes jumped. The University of Michigan’s consumer sentiment index showed that Americans were feeling more confident about the economy at the end of last month.
Underlying the improvement is a strengthening job market. Employers have been adding 200,000 jobs a month since November last year, twice the pace from last spring. Unemployment in February fell to 7.7 percent, the lowest level since December 2008.