American factories expanded last month at the slowest pace in a year, as orders, production, and hiring all declined. The figures suggested manufacturing may not add much to growth in the first few months of 2015.
The Institute for Supply Management, a trade group of purchasing managers, says this morning that its manufacturing index fell to 53.5 in January from 55.1 in December. The Associated Press reports that’s the third straight drop and lowest level since January 2014. Still, any reading above 50 signals expansion.
Manufacturing helped accelerate economic growth last year as Americans bought more cars and businesses spent more on industrial machinery and equipment. But slower overseas growth and cutbacks in business investment in oil and gas drilling equipment are weighing on factory output. A labor dispute at West Coast ports is also disrupting supply chains for many industries.
New orders grew last month, but at the slowest pace in a year, the survey found. That suggests manufacturing growth will remain modest. Factories added jobs, but at the weakest pace since June. That’s a negative sign for this week’s jobs report, which will be released Friday.
Still, economists weren’t overly concerned by the report. Most said it is consistent with steady growth in the first quarter.
“This decline is no reason to panic,” Paul Ashworth, an economist at Capital Economics, said in a note to clients.
Factories face several headwinds. In addition to slower overseas growth, the dollar has risen steadily in value as the U.S. economy’s strength has attracted international investors. That makes U.S. goods more expensive overseas. Both trends have weighed on American firms’ export sales. A measure of export orders fell last month to 49.5 from 52, the ISM’s report found. Read the full story.
