Manufacturing Grows Less than Forecast in March

Manufacturing grew less than estimate in March as orders and production slowed down. It indicated the risk of a US economic slowdown in the first quarter as federal budget cuts take effect. The Institute for Supply Management’s factory index dropped to 51.3 from an almost two year high of 54.2 in the previous month. A reading of 50 is the line between contraction and growth. Another report showed construction spending increased in February due to the strongest home building outlays in more than four years.

The manufacturing report from the ISM showed housing and auto related industries outpaced other sectors last month. Consumer spending has boosted the expansion as exports grew at the fastest rate in almost a year. The failure to reach an agreement on how to decrease the debt led to the automatic spending cut worth $85 billion that took effect March 1.

Stocks dropped along with manufacturing. Standard & Poor’s 500 Index closed 0.5 percent lower at 1,562.17 after reaching its record high last week.

Confidence among big Japanese manufacturers in March improved but it was less than what economists have expected. Companies said they would cut investments by the most since the global recession. In China, manufacturing expanded at a faster rate in March and showed that the world’s number two economy is stabilizing.

Another report from the United States highlighted the risk from the federal spending cuts. Spending on construction projects increased 1.2 percent in February. Homebuilding reached its highest level in more than four years. The data indicated federal outlays were the only weak factor. It dropped in February for the second straight month.

Economists at JPMorgan Chase & Co. increased tracking estimate for first quarter growth to 3.8 percent annualized rate from the previous 2.7 percent. It showed the improving outlook for consumer spending and homebuilding.