Expansion in the manufacturing sector slowed in August, the Institute for Supply Management said Wednesday, as fewer companies reported an increase in orders and production.
In a second report, the Commerce Department said construction spending rose in July for the fifth time in the last six months.
The institute’s factory index last month declined to 59, the lowest level since October, from 62 in July. Economists expected the index to fall to 60. A reading higher than 50 indicates expansion, and the gauge has been above that level since June 2003.
“The manufacturing sector has cooled somewhat, but it’s still very warm,” said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Conn.
Orders slowed after the economy expanded in the second quarter at the slowest pace in more than a year. The new-orders component of the index, which accounts for about a third of the total, fell to 61.2 from 64.7 in July. The production index, a gauge of work being performed, declined to 59.5 from 66.1.
The employment index dropped to 55.7 from 57.3. The index of inventories rose to 51.7 from 49.9, indicating inventories are being rebuilt after falling a month earlier. The prices-paid index jumped to 81.5 from 77.
“We see manufacturing as being strong and fairly consistently strong,” said John Ryan, chief executive at Mine Safety Appliances Co. in Pittsburgh. “When you’re in business, you don’t get too upset about this little bit up or little bit down.”
Manufacturers added 10,000 workers to their payrolls in July, accounting for a third of the total increase, Labor Department figures show.
The report for August, due Friday, is forecast to show a gain of 15,000 factory jobs among the expected 150,000 increase in payrolls.
In its report, the Commerce Department said construction spending rose 0.4 percent in July, to a record annual rate of $997.2 billion, led by work on housing. Private residential construction, which accounts for more than half the total, increased 0.3 percent, to a record $537.5 billion.
“The fundamentals from our vantage point continue to be very good,” said Alan Levan, chief executive of Levitt Corp., a Ft. Lauderdale-based home builder. “We are continuing to see significant traffic.”
Construction of office buildings fell 2.5 percent, to $31.4 billion. Spending on factories and related facilities rose 8.7 percent, to $14.1 billion. Government-funded construction increased 0.6 percent, to a record $238.9 billion.
