Manufacturing in the U.S. expanded in April at the slowest pace in four months, indicating the industry will contribute less to U.S. growth this quarter.
The Institute for Supply Management’s factory index fell to 50.7 from the prior month’s 51.3, the Tempe, Arizona-based group’s report showed today. A reading of 50 is the dividing line between expansion and contraction. The median forecast of 84 economists surveyed by Bloomberg was 50.5.
Manufacturing, which makes up about 12% of the economy, is cooling as the need to rebuild inventories wanes and across-the-board federal budget cuts take hold. Companies such as Tenneco Inc. project it may take until the second half of the year for demand to pick up as American consumers grapple with higher payroll taxes and Europe’s economy struggles to expand.
“We’re in a bit of a lull right now,” Bricklin Dwyer, an economist at BNP Paribas in New York, said before the report. “It’s consistent with the pullback in the broader economy, in consumer spending, business spending and government. We see this as temporary.”
The median forecast was based on projections from 84 economists in the Bloomberg survey. Estimates ranged from 49 to 53.
Other figures today show manufacturing across the globe is struggling to improve. In China, the world’s second-largest economy, factories expanded at a weaker pace in April. The Purchasing Managers’ Index fell to 50.6 last month from 50.9 in March.
A U.K. factory index showed manufacturing contracted for a third month. The gauge rose to 49.8 last month from 48.6, according to Markit Economics and the Chartered Institute of Purchasing and Supply.
Another report showed companies in the U.S. added fewer workers than forecast in April, an indication the labor market has cooled along with the rest of the U.S. economy.
The 119,000 increase in employment, the weakest since September, followed a revised 131,000 gain in March that was smaller than initially estimated, according to figures from the Roseland, New Jersey-based ADP Research Institute. The median forecast of 37 economists surveyed by Bloomberg projected a 150,000 advance.
The ISM’s index of U.S. employment gauge decreased to 50.2, the lowest in five months, from 54.2.
The production increased to 53.5 from 52.2 in March. The new orders measure rose to 52.3 from 51.4, and the gauge of export demand dropped to 54 from 56.