TEHRAN, Jul 2 -US manufacturing activity slowed to near a three-year low in June, with a measure of new orders received by factories tumbling, amid growing anxiety over an escalation in trade tensions between the United States and China.
TEHRAN, Young Journalists Club (YJC) -Other data on Monday showed construction spending unexpectedly fell in May as investment in private construction projects dropped to its lowest level in nearly 2-1/2 years.
The reports were the latest indications that economic growth slowed in the second quarter after getting a temporary boost from exports and an accumulation of inventory.
While the slowdown in factory activity was not as steep as had been flagged by some regional factory surveys, a sharp drop in a gauge of prices paid by manufacturers could be yet another reason for the Federal Reserve to consider cutting interest rates this month.
The U.S. central bank last month signaled it could ease monetary policy as early as this month, citing low inflation as well as growing risks to the economy from US-China trade tensions.
"Manufacturing is clearly taking it on the chin from the rising trade uncertainty," said Chris Rupkey, chief economist at MUFG in New York.
The Institute for Supply Management (ISM) said its index of national factory activity dropped to 51.7 last month, the lowest reading since October 2016, from 52.1 in May. It was the third straight monthly decline in the index.
A reading above 50 indicates expansion in the manufacturing sector, which accounts for about 12 percent of the US economy.
Economists polled by Reuters had forecast the ISM index would fall to 51.0 in June.
The ISM said businesses "expressed concern about US-China trade turbulence." They were also spooked by potential tariffs on Mexican imports, which were averted at the eleventh hour.
The United States' bitter trade war with China has hurt business sentiment. That, together with disruptions to supply chains caused by import tariffs, is weighing on manufacturing.
US President Donald Trump and Chinese President Xi Jinping on Saturday agreed to a trade truce and a return to talks.
But Trump said he was "in no hurry" to cut a deal and Chinese state media warned there was no guarantee an agreement would be reached. Trump in May raised import tariffs on $200 billion in Chinese goods, prompting Beijing to retaliate.
Manufacturing is also taking a hit from an inventory overhang, which has resulted in businesses placing fewer orders with manufacturers.
A reduction in the production of Boeing's MAX 737 aircraft, which was grounded in March after two fatal plane crashes in five months, is also a drag on activity.
The weakness in factory activity is in sync with a slowdown in economic growth following a temporary boost from exports and an accumulation of inventory. Consumer spending is rising moderately, while the pace of job and wage growth has slowed.
In addition, the housing market is struggling and the goods trade deficit widened in May.
The ISM's forward-looking new orders sub-index decreased 2.7 points to a reading of 50.0 last month, the lowest reading since December 2015. A measure of prices paid by manufacturers tumbled 5.3 points to 47.9.
Source: Reuters
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