A gauge of U.S. manufacturing trailed estimates for October and signaled the sector contracted for a third-straight month, with the weakest production level since the last recession.
The Institute for Supply Management index rose to 48.3 from a 10-year low of 47.8 in September, compared with the median projection for 48.9. The report Friday showed three of five components -- new orders, employment and inventories -- rose from September but stayed below 50, the line separating expansion and contraction. The production component sank to 46.2 in a fourth-straight drop, though that may reflect the impact of the six-week walkout of General Motors Co. workers during the month.
The reading highlights the challenges for a manufacturing sector confronting head winds ranging from the ongoing trade tensions with China to slowing global growth and the strong dollar. That has forced some producers to cut back on hiring and delay investment, though unemployment at a half-century low and a stable expansion show that the shaky sector isn't derailing the world's largest economy.
Twelve of 18 industries reported contraction, including primary metals and electrical equipment, the institute said in a statement. Global trade remained the biggest issue across industries, and transportation equipment was especially weak.
President Donald Trump's trade war with China and conflicts with other trading partners have created uncertainty for manufacturers. They have delayed purchases and investments because they don't know whether or when Trump will lift taxes on imports and which countries he might target next.
"A business owner can't make decisions fast enough to keep up," said Kip Eideberg, senior vice president of government and industry relations at the Association of Equipment Manufacturers.
Several respondents commented about the GM strike and the grounding of Boeing's 737 Max airliner, which were factors that likely weighed on readings for employment, output and new orders, according to Timothy Fiore, chairman of the institute's manufacturing survey committee.
The institute's employment gauge rebounded from a three-year low to 47.7, suggesting companies continue to cut staff positions but at a slower rate. Friday's Labor Department jobs report showed factory employment posted a second-straight drop in October, driven by the GM strike, as U.S. payrolls climbed.
While manufacturing makes up only 11% of gross domestic product, the concern is that the deterioration in the sector could spread. Federal Reserve Chairman Jerome Powell said Wednesday that consumers haven't shown signs of being affected by manufacturing weakness.
The crosscurrents for factories were visible in the institute's trade data, with the measure for imports declining to a 10-year low of 45.3.
Meanwhile, the export orders index, a proxy for overseas demand, rebounded from a 10-year low with the biggest gain since 2011. That brought it to 50.4, back to a level signaling expansion for the first time since June and making it the only sub-gauge that's above that dividing line for October.
The new-orders gauge rose to 49.1, and measures of both customer and business inventories also increased. The index of supplier deliveries slumped to the lowest level since February 2016.
The institute's index of prices paid sank further below 50, suggesting inflationary pressures remain muted. Order backlogs declined.
In a separate report, U.S. construction spending rose 0.5% in September, boosted by government and private residential projects.
Private residential construction spending increased 0.6%, the third-straight month of gains after declines in April, May and June. Spending on single family home construction rose 1.3%, more than enough to offset the 0.7% drop in apartments and multifamily home building.
September's overall construction spending was higher than forecast, with analysts surveyed by FactSet expecting a rise of just 0.2%. The September rebound comes as the previous August gain of 0.1% was revised to a decline of 0.3%.
Last month, the Commerce Department reported that housing starts fell 9.4% in September, but that was after a 12.3% surge in August. Construction of both homes and apartments has risen 1.6% in the past year, suggesting the housing market remains solid.
Lower mortgage rates and a healthy job market with rising wages have boosted home sales and the demand for new homes. The average interest rate on a 30-year mortgage has risen slightly in the past few weeks, but is still low at 3.78%.
Commerce said Friday that government construction spending rose 1.5% during the month, with state and local building offsetting declines in federal spending. Power and water projects saw the sharpest increases.
Overall construction spending after adjusting for seasonal variations came in at an annual rate of $1.29 trillion, 2% lower than September 2018.
During the first nine months of 2019, U.S. construction spending was $968.7 billion, a drop of 2.2% from the first nine months of 2018.
Information for this article was contributed by Reade Pickert of Bloomberg News and by Matt Ott and Paul Wiseman of The Associated Press
Business on 11/02/2019