ISM manufacturing index hits 53.5 in Jan.; Construction spending up 0.4% in Dec.

The pace of growth in the U.S. manufacturing sector slowed in January more than expected, according to an industry report released on Monday.

The Institute for Supply Management (ISM) said its index of national factory activity fell to 53.5 from 55.1 the month before. The reading was shy of expectations of 54.5, according to a Reuters poll of economists.

A reading above 50 indicates expansion in the manufacturing sector.

Read MoreConsumer spending weakest since 2009, inflation muted

Most components of the index declined, suggesting a slowing in the pace of growth in the factory sector, though the 50-plus reading marks the 27th consecutive month of growth in manufacturing.

The new orders index fell to 52.9 from 57.8. The prices paid index fell to 35 from 38.5, compared to expectations for 39.5. The employment index fell to 54.1 from 56, also short of expectations for a reading of 56.

In a separate report, construction spending rose less than expected in December, with private outlays barely rising amid declines in investment in power and transportation projects.

Construction spending rose 0.4 percent to an annual rate of $982.1 billion, the Commerce Department said on Monday.

November's construction outlays were revised up to show a 0.2 percent decline instead of the previously reported 0.3 percent fall. Economists polled by Reuters had forecast construction spending rising 0.7 percent in December.

For all of 2014, construction spending increased 5.6 percent. The government reported on Friday that the economy grew at a 2.6 percent annual pace in the fourth quarter, slowing from the third-quarter's 5.0 percent rate.

In December, private construction spending edged up 0.1 percent, with outlays for power projects falling 1.0 percent and spending on transportation dropping 1.4 percent.

Outlays on residential projects rose 0.3 percent. Residential spending was lifted by gains in both single- and multi-family homes as well as renovations.

Spending on public construction projects increased 1.1 percent in December.

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