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US factory activity continues to expand, construction spending disappoints

  • National factory activity in July was slightly below economists' expectations but continued to expand.
  • The U.S. manufacturing index registered 56.3 on the Institute for Supply Management's index.
  • Construction spending slipped 1.3 percent in June, missing forecast growth of 0.4 percent.
An employee welds a joint on an industrial clothing rack at Staber Industries in Groveport, Ohio.
Ty Wright | Bloomberg | Getty Images
An employee welds a joint on an industrial clothing rack at Staber Industries in Groveport, Ohio.

National factory activity continued to expand in July, building on June's return to expansion not seen since August 2014.

The U.S. manufacturing index registered 56.3 percent, coming in just below the 56.5 percent expected by economics polled by Reuters. A reading above 50 on the Institute for Supply Management's (ISM) index indicates an expansion in manufacturing, which accounts for about 12 percent of the U.S. economy.

The employment index fell to 55.2 from 57.2 a month earlier. Expectations called for a reading of 55.1.

New orders dropped to 60.4 from 63.5. The prices paid index rose to 62.0 from 55.0, compared to expectations of 55.5.

Construction spending continues to disappoint 

Construction spending decreased 1.3 percent in June, missing forecast growth of 0.4 percent. The second decline in the last three months came as spending on government construction projects plunged by the largest amount in 15 years.

June was the biggest drop in construction spending since a 1.8 percent decline in April, with the only recent uptick coming from a tiny 0.3 percent increase in May.

The only positive reading in June was in non-residential construction, which ticked up 0.1 percent.

While construction has weakened in recent months, economists believe the slowdown will be temporary. They forecast that construction, particularly home construction, will rebound amid low unemployment.

Home construction declined 0.2 percent, the third consecutive decrease in that category. Government spending fell 5.4 percent, the biggest drop since a 6 per cent decline in March 2002.

– AP contributed to this report.