U.S. factories lose steam but private sector steps up hiring

Wed Oct 1, 2014 2:16pm EDT
 
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By Jason Lange

WASHINGTON (Reuters) - Growth in U.S. factory activity slowed more than expected in September even as hiring in the private sector accelerated, signs of an uneven expansion in the U.S. economy.

The Institute for Supply Management said on Wednesday its index of national factory activity dropped to 56.6 last month, its lowest level since June, from 59.0 in August. Economists had forecast it would slide to just 58.5.

A gauge of new orders fell to 60.0 from 66.7.

Analysts have warned that U.S. factories could feel a chill from soft demand in the global economy and from recent strength in the dollar, and the ISM data could be a harbinger.

Still, gauges of U.S. manufacturing activity remain historically strong, with the ISM index still comfortably above the 50 mark that separates expansion from contraction - a sign the economy is still moving forward with strength.

Analysts believe U.S. gross domestic product is growing much more quickly than its 2.2 percent average over the last two years, and the data did little to knock that view.

"It still looks as though overall GDP growth in the third quarter was around 3.5 percent," said Paul Dales, an economist at Capital Economics in London.U.S. Treasury yields fell as data from the United States, Europe and Asia all showed factory activity faltering, while stocks extended losses and the dollar slipped.

The slowdown in U.S. factory growth followed an August reading that was the strongest since March 2011, leading some analysts to downplay the significance. "Whether this month is a turning point is still to be seen," said Pierre Ellis, an economist at Decision Economics in New York.   Continued...

 
Workers assemble built-in appliances at the Whirlpool manufacturing plant in Cleveland, Tennessee August 21, 2013.  REUTERS/Chris Berry