US manufacturing activity rose in April, but the optimism of two straight months of expansion was tempered by the month’s slower pace as both new orders and production fell.
On Monday, the Institute for Supply Management (ISM) said its index of national factory activity was 50.8 for April. While a reading more than 50 indicates expansion in the manufacturing sector, the reading was a significant drop from the 51.8 posted in March. A gauge of orders received by factories fell 2.5 points to 55.8%.
As oil prices plunged over the past year, the energy sector has instituted aggressive spending cuts. As businesses try to burn off excess inventory they have placed fewer orders with factories, which continues the manufacturing sector’s erosion.
In general, manufacturing, which makes up 12% of the US economy, has been hurt by weak export growth stemming from a strong dollar and soft global demand.
The US economy grew at a 1.4% rate in the fourth quarter, but by the first quarter economic growth had slowed to a 0.5% annualized rate. Still, economists expect the economy to rebound in the second quarter.