WASHINGTON -- Growth in factory activity slowed more than expected in September even as private sector job growth accelerated, signs of an uneven expansion in the U.S. economy.
The Institute for Supply Management said Wednesday its index of national factory activity dropped to 56.6 last month, its lowest level since June. A reading above 50 indicates expansion.
Analysts have been warning U.S. factories could feel a chill from soft demand in the global economy and from recent strength in the U.S. dollar, and the ISM data could be an indication of this.
Still, U.S. factory growth remains historically strong and the wider economy appears to have shifted into a higher gear.
A separate report from a major payrolls processor showed U.S. private employers added 213,000 jobs in September, just above economists' expectations.
"It still looks as though overall GDP growth in the third quarter was around 3.5 percent," said Paul Dales, an economist at Capital Economics in London.
U.S. Treasury yields fell as data from the U.S., Europe and Asia showed the factory sector faltering, while the dollar slipped. U.S. stocks, which opened lower on concerns the first diagnosis of Ebola in the United States could curb air travel, extended losses after the manufacturing data was released.
The slowdown in U.S. factory growth last month follows an August reading that had been the strongest since March 2011, leading some analysts to downplay the significance of the September reading.
"This is still a very strong reading by historical standards," said Ian Shepherdson, an economist at Pantheon Macroeconomics.
Construction spending dropped 0.8 percent to an annual rate of $960.96 billion. Economists polled by Reuters had forecast construction spending increasing 0.5 percent in August.
The surprise decline was largely due to a 1.4 percent drop in money spent on private nonresidential construction, although outlays fell across the board with state and local construction down 0.9 percent.
Private spending on housing fell only 0.l percent in August, which is unlikely to unmoor expectations of an ongoing recovery in the housing market.
-With additional reporting by Michael Connor, Rodrigo Campos and Richard Leong in New York.
9 Numbers That'll Tell You How the Economy's Really Doing
Employers Step Up Hiring, but Factory Growth Slows
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.