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US Manufacturing Beats Estimate; Construction Spending Falls

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U.S. manufacturing expanded slightly in December, while a separate report showed that U.S. construction spending fell in November for the first time in eight months.

The Institute for Supply Management (ISM) said its index of national factory activity rose to 50.7 from 49.5 in November, bouncing back from an unexpected contraction the prior month, according to an industry report released on Wednesday. The reading narrowly beat 50.3, the median expectation of 55 economists polled by Reuters.

A reading above 50 indicates expansion in the sector.

While the index recovered from the 40-month low hit in November, it was well off the 54.1 reading seen in January 2012, suggesting manufacturing was still struggling to regain the momentum it had at the start of last year.

The employment index rose to 52.7 in December from 48.4, while the forward-looking new orders component was steady at 50.3. Prices paid jumped to 55.5 from 52.5, beating expectations of 51.5.

Another report showed that U.S. construction spending fell in November for the first time in eight months, as an extended bout of weakness in the business sector outweighed modest growth in outlays on residential projects.

Construction spending dropped 0.3 percent to an annual rate of $866 billion, the Commerce Department said on Wednesday. Analysts polled by Reuters had expected a 0.6 percent gain.

Businesses have shown signs they are holding back on investments because of worries over federal austerity plans, and the construction data could be another sign of flagging confidence.

Private spending on nonresidential projects slipped by 0.7 percent, the fourth decline in six months.

Spending on private residential projects, however, rose 0.4 percent, a reflection of the country's improving housing market.

Home building likely added to economic growth in 2012 for the first time since 2005, although the housing sector remains a shadow of what it was before the 2007-09 recession.

Public sector construction spending fell 0.4 percent. State and local spending edged 0.1 percent higher, while outlays on federal government projects — a relatively small component of overall construction spending — declined 5.5 percent.

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