U.S. and China Manufacturing Experiences Slow-Down

Factory activity in the U.S. and China slowed in January, according to a report by the Institute for Supply Management (ISM). U.S. manufacturing declined for the fourth consecutive month due to a strong dollar and weak demand overseas. The ISM’s manufacturing index inched up to 48.2 from 48 in December, though any reading below 50 indicates contraction.

Factory exports and employment declined in January, while new orders and production increased for the first time since October.

In China, an index based on a survey of factory purchasing managers fell to 49.4 from 49.7 in December, its lowest level in more than three years. But a separate index showed growth in China’s services sector, underscoring to country’s continuing economic transition from manufacturing to services.

Bradley Holcomb, chairman of the ISM survey committee, attributes the discouraging U.S. manufacturing trend to the strong dollar and excess of raw materials held by many companies. Until the stockpiles are reduced, the companies will likely order fewer goods. “For now, it’s more of the same,” Holcomb said in a statement to the Associated Press. “New orders are a bright spot here, and we’ll hope that continues.”

In a separate report, the Commerce Department stated that construction spending edged up 0.1% in December after a revised 0.6% drop in November. Economists had hoped construction spending would rise 0.6% in December, but a 2.1% decline in nonresidential structures such as factories and offices constrained spending. Construction outlays climbed 10.5% in 2015, the biggest rise in a decade.