NEW YORK (Reuters) - The pace of growth in the U.S. manufacturing sector unexpectedly slowed in February, according to an industry report released on Thursday.
US Jan construction spending -0.1 pct (consensus +1.0 pct) to $827.0 bln vs Dec +1.4 pct (prev +1.5 pct)
MARK VITNER, SENIOR ECONOMIST, WELLS FARGO SECURITIES, CHARLOTTE, NORTH CAROLINA
“ISM wasn’t a total surprise. The drop in new orders, coming on the heels of the weakness that we saw in January durable goods makes this not out of character. There was probably a build up in orders right at the end of last year as folks were rushing to put in orders for new equipment ahead of the expiration of the 100 percent depreciation on new equipment purchases. But 52.4 is still pretty consistent with strong growth.”
CRAIG DISMUKE, CHIEF ECONOMIC STRATEGIST, VINING SPARKS, MEMPHIS, TENNESSEE
ISM: “This is a mixed report. Export is better than I had thought but new orders dropped a bit. Given the recent data have been stronger on balance, I‘m not that worried. This is not a game changer. There is a lot better sentiment out there. We will still have slow growth in the foreseeable future.”
CONSTRUCTION SPENDING: “Residential construction is still showing gains month-over-month so that’s encouraging. It looks like housing is finding some foundation.”
JOHN DOYLE, CURRENCY STRATEGIST, TEMPUS CONSULTING, WASHINGTON, D.C.
“We’ve generally been seeing relatively strong data in the U.S., especially when compared to our European partners. This is something that would give us pause a bit, but at the same time it’s still not a bad number either. It just slightly missed expectations, but overall you wouldn’t say ‘oh man, the entire manufacturing industry is falling apart.’ Overall I don’t know that this number specifically is going to be able to drive markets.”
OMER ESINER, CHIEF MARKET ANALYST, COMMONWEALTH FOREIGN EXCHANGE, WASHINGTON D.C
“This was certainly softer than expected. Prices paid were up sharply, a reflection of higher energy and commodities prices in February. On balance, this was a little disappointing and I suspect risk appetite will moderate a little bit from here and we are already seeing the dollar perk up a bit as a result. This is one number, though, and does not dampen the overall optimism seen in the recovery.”
ISM: ”What a surprise after Chicago yesterday. The thing about Chicago is that every once in a while it does go its own way...The ongoing global challenges are part of what we’re seeing in the number today. Also, there has been an accelerated depreciation tax credit for businesses purchasing capital in place for several years but it expired in December and was not extended. I think that affected today’s number and the weakness in durable goods orders in January as well.
CONSTRUCTION SPENDING: “As far as construction spending goes, the series has been remarkably volatile for almost a year. Month-to-month swings are bigger than anything we’ve ever seen before. I‘m not sure what the cause of that is but it’s good reason not to put too much weight in any one number.”
VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS
”After having risen for five straight months, and quite notedly in four of those months, construction spending slipped down by 0.1% in January, as the surprise rise from private nonresidential projects in December retracted, and pulled the headline down. The market thought spending would show its sixth gain, with expectations averaging to 1%.
“Revisions overall enhanced growth values, even though they lowered certain areas, because they showed a stronger residential picture. Revisions kept a good amount of December’s support from private nonresidential intact, now up 2.1% when it had been 3.3%.”
Americas Economics and Markets Desk