Featured # Markets | 2 years ago

United States Factory Activity Increases

United States factory activity grew at a healthy rate in June as new orders, output, and exports, increased. This data came on Friday and was another single that United States manufacturing was regaining its momentum after weakness earlier during 2016. However, construction spending data for May decreased for the second consecutive month following a massive decrease in April, suggesting that the growth outlook is still ambiguous, especially after Britain decided to secede from the European Union.

The Institute for Supply Management published on Friday that its national factory index increased to 53.2 in June from 51.3 during the month of May. A reading above 50 shows that there has been expansion in the manufacturing sector, which makes up just about twelve percent of the United States economy. The ISM new factory orders index in June indicated a reading of 57.0 versus a 55.7 in May. At the same time, export orders respectively read 53.5 versus 52.5. The order backlog index jumped to 52.5 from 47.0, while production increased to 54.7 from 52.6. U.S. stocks also rose following the ISM data, while Treasury prices trimmed gains. The dollar was trading lower against a basket of currencies.

Manufacturing is still constrained by the ongoing effects of the dollar’s increase and the oil price decrease between June of 2014 and December of 2015. The sector has also been hurt by business efforts to reduce an inventory oversupply, which has cut orders. The Commerce Department stated on Friday that May construction spending was declining 0.8 percent following a 2.0 percent fall in April. The revised April drop was the biggest since January of 2011. Economists had predicted that construction spending would increase 0.6 percent after April’s decrease of 1.8 percent. May construction outlays were up 2.8 percent from the same point a year ago. May construction spending did not go up because of a 2.3 percent fall in public construction expenditures. Outlays on state and local construction projects, the largest of the public sector segment, fell 3.0 percent, while federal construction spending grew by 7.5 percent.

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