Manufacturing expands at slowest pace since May

American factories expanded in January at the weakest pace in eight months as orders slumped, a sign manufacturing cooled at the start of the year along with the weather. More

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Manufacturing expands at slowest pace since May

Posted 2/3/14

WASHINGTON – American factories expanded in January at the weakest pace in eight months as orders slumped, a sign manufacturing cooled at the start of the year along with the weather.

The Institute for Supply Management’s factory index decreased to 51.3 from 56.5 the prior month, the Tempe, Ariz.-based group’s report showed on Monday. The January figure was less than the most pessimistic forecast in a Bloomberg survey in which the median estimate was 56. Readings above 50 indicate expansion.

The group’s measure of orders declined by the most since December 1980 as “a number” of purchasing managers said adverse weather slowed business. Sustained gains in consumer purchases, improvement in the labor market and a pickup in capital spending will be needed to keep assembly lines humming in the world’s biggest economy.

“The exceptionally cold weather and the harsh snow storms - we all move a little bit slower in those periods and the economy is no different,” said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. Price is the top-ranked forecaster of the ISM index over the past two years, according to data compiled by Bloomberg. Still, “it should be some testament to the economy’s fundamental underpinnings that it was able to expand during such conditions.”

Estimates in the Bloomberg survey of 85 economists ranged from 54 to 57.5. Manufacturing accounts for about 12 percent of the economy. The factory gauge averaged 53.9 for all of 2013.

‘Severe weather’

“Comments from the panel this month show a mix of concern over severe weather conditions from the coldest January in many, many years,” Bradley Holcomb, chairman of the ISM’s manufacturing report, said on a conference call with reporters. “The outlook for the rest of the year remains solid. This is a blip on the screen.”

Stocks extended losses after the report, with the Standard & Poor’s 500 Index falling 0.8 percent to 1,767.74 at 10:41 a.m. in New York.

The ISM’s new orders measure plunged to 51.2 last month from 64.4 in December. A gauge of production dropped to 54.8, also the lowest since May, from 61.7. The index of bookings waiting to be filled decreased to 48 in January from 51.5.

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