U.S. factory activity, construction spending unexpectedly fall

WASHINGTON (Reuters) – U.S. factory activity contracted further in November amid a slump in new orders while construction spending unexpectedly fell, offering cautionary notes on an economy that had recently shown signs of growing at a moderate pace.

FILE PHOTO: A General Motors assembly worker loads engine block castings on to the assembly line at the GM Romulus Powertrain plant in Romulus, Michigan, U.S. August 21, 2019. REUTERS/Rebecca Cook/File Photo

The reports on Monday came on the heels of upbeat October data on the goods trade deficit, housing and manufacturing that led economists to boost their gross domestic product estimates for the fourth quarter.

The Institute for Supply Management (ISM) said its index of national factory activity dropped 0.2 point to a reading of 48.1 last month. A reading below 50 indicates contraction in the manufacturing sector, which accounts for 11% of the U.S. economy.

The ISM index needs to break below the 42.9 level to signal a recession in the broader economy. Economists polled by Reuters had forecast the index rising to 49.2 in November from 48.3 in the prior month.

Though the ISM said business sentiment had improved, likely as the United States and China inch towards a partial trade deal, November’s reading marked the fourth straight month that the index remained below the 50 threshold.

Continued contraction in manufacturing could put the Federal Reserve in a difficult policy position. The U.S. central bank in October cut interest rates for the third time this year and signaled a pause in the easing cycle that started in July when it

Keep reading this article on Reuters Business.

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