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 Other data on Friday showed construction spending hit a six-month
low in March, also indicating that the anticipated acceleration in
growth in the second quarter could disappoint. That could see the
Federal Reserve delaying raising interest rates until later this
year.
The economy expanded at a 0.2 percent annual pace in the first three
months of the year, slammed by bad weather, a strong dollar and a
now-resolved labor dispute at the West Coast ports, as well as lower
oil prices, which have undercut domestic energy production.
"The reacceleration in growth will not come fast enough for many,
especially those looking for a liftoff by the Fed to happen sooner,"
said Diane Swonk, chief economist at Mesirow Financial in New York.
The Institute for Supply Management said its index of national
factory activity was at 51.5 in April, matching the March reading,
which had been the lowest since May 2013.
The index had declined since November and economists had expected it
to rise to 52 in April. A reading above 50 indicates expansion in
the manufacturing sector.
While new orders rose last month, a gauge of factory employment
contracted for the first time since May 2013 and recorded its lowest
reading since September 2009.
Manufacturing has been hit by the dollar's 12 percent appreciation
against the currencies of the United States' main trading partners
since June.
The buoyant currency has hurt export growth and profits of
multinational corporations, including Procter & Gamble Co <PG.N>,
the world's largest household products maker, and prompted
Colgate-Palmolive <CL.N> and healthcare conglomerate Johnson &
Johnson <JNJ.N> to cut their profit forecasts for the full year.
Whirlpool Corp <WHR.N>, the world's largest maker of home
appliances, lowered its profit forecast and sales outlook for 2015.
Manufacturing, which accounts for about 12 percent of the U.S.
economy, is also being pressured by the lower oil prices, which have
caused oil-field companies to slash spending on exploration and well
drilling.
Caterpillar Inc <CAT.N> has warned the dollar and weak oil prices
will hurt profits this year.
U.S. stocks closed higher. The dollar rose against a basket of
currencies, while U.S. Treasury debt prices fell.
REGAINING FOOTING
Separately, auto sales fell to an annualized pace of 16.45 million
vehicles last month from a 17.15 million-unit rate in March.
However, General Motors Co <GM.N> and Ford Motor Co <F.N> reported
stronger-than-expected U.S. auto sales in April on robust demand for
trucks, and crossover and sports utility vehicles.
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Demand for autos is likely to pick up in the months ahead. In
another report, the University of Michigan said its overall index on
consumer sentiment rose to 95.9 this month, the second highest level
since 2007, from 93.0 in March.
Consumers were upbeat about both current conditions and expectations
for the future. More consumers said it was a good time to buy a
major household item and a vehicle. There was also an increase in
consumers saying it was a good time to buy and sell a house, which
should support home sales.
"This suggests that there may be some upside risk for durable goods
spending in the second quarter ... and that perhaps housing market
activity will pick up in the months ahead," said Mark Vitner, a
senior economist at Wells Fargo Securities in Charlotte, North
Carolina.
In a fourth report, the Commerce Department said construction
spending slipped 0.6 percent to an annual rate of $966.6 billion in
March, the lowest level since September.
Construction spending was weighed down by a 1.6 percent decline in
private residential construction spending, the biggest such decline
since June. Public construction outlays were also weak.
"We think the outlook for residential construction is positive in
2015 as household formation appears to have picked up and as house
price gains have remained firm," said John Ryding, chief economist
at RDQ Economics in New York.
(This version of the story recasts with final auto sales data)
(Reporting by Lucia Mutikani; Editing by Paul Simao and Andrea
Ricci)
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