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US manufacturing, construction sectors slow down

Manufacturing activity fell for the third consecutive month in June, according to the Institute for Supply Management.
Manufacturing activity fell for the third consecutive month in June, according to the Institute for Supply Management.Jim Young/AFP/Getty Images/File/AFP/Getty Images

WASHINGTON — US factory activity grew at a slower pace in June for the third straight month as measures of new orders and inventories fell.

Also, construction spending fell for the first time in six months in May.

The Institute for Supply Management, an association of purchasing managers, said Monday that its manufacturing index slipped to 51.7 last month from 52.1 in May. Any reading above 50 signals an expansion.

The Commerce Department said construction spending fell 0.8 percent in May to a seasonally adjusted annual rate of $1.29 trillion.

While the manufacturing sector is still growing, the report pointed to an ongoing weakening in US manufacturing. Trade fights with China, Europe, and Mexico, as well as an increase in the dollar’s value, have cut into US exports and increased uncertainty for American manufacturers.

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A measure of new orders dropped to 50, which means they were unchanged. Manufacturers are also holding fewer supplies, a sign they are worried that demand could slow further.

‘‘It’s concerning,’’ said Tim Fiore, chair of the ISM’s manufacturing survey committee. ‘‘This is going down faster than I would like.’’

The ISM surveys purchasing managers at manufacturing firms, nearly half of whom said that trade policy was negatively affecting their businesses in some way.

‘‘Tariffs are causing an increase in the cost of goods, meaning US consumers are paying more for products,’’ a chemical manufacturer told the ISM.

A measure of new export orders was just 50.5, suggesting overseas demand is barely growing. Overall order backlogs are also shrinking, and customers’ inventories, while still declining, are doing so more slowly. When manufacturers’ customers hold larger stockpiles, that means they order fewer goods from factories.

There were some positive signs: Production and employment increased at a faster pace in June.

President Trump has postponed two of his largest, most recent tariff threats, but that hasn’t fully removed the threat to manufacturers. He agreed over the weekend to hold more trade talks with China, rather than impose import taxes on $300 billion of Chinese imports. He also delayed an across-the-board 25 percent duty on all imports from Mexico, which he threatened to impose in May.

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Yet those threats still loom and are forcing many manufacturers to rethink their supply chains.

‘‘The situation is crazy, driving a huge amount of work (and) costs, as well as potential supply disruptions,’’ a computer and electronics company told ISM.

The weakness in construction spending in May was widespread with spending on single-family homes and apartments down 0.6 percent while nonresidential construction fell 0.9 percent. Spending on government projects also dropped 0.9 percent, led by a by decline in construction spending by the federal government.