The ISM manufacturing index drops in July; construction expenses decrease

The US manufacturing sector expanded in July, but the pace of growth has slowed to its lowest point in almost three years, due to the overall decline in activity compared to the previous month, a report released Thursday.

The Institute for Supply Management (ISM) said its national mill activity index had dropped to 51.2, its lowest level since August 2016.

This compared to a figure of 51.7 in June. Analysts polled by Reuters expected a reading of 52.0 for July.

Construction spending in the United States dropped to a seven-month low in June, as private construction investment reached its lowest level in more than 1.5 years.

The Commerce Department said Thursday that construction spending fell 1.3 percent, the biggest drop since last November. May data were revised upwards to indicate that construction expenditures decreased by 0.5% instead of 0.8%, as previously reported.

Economists polled by Reuters had forecast construction spending up 0.3% in June. Construction spending declined 2.1% from one year to the next in June.

Expenditures on private construction projects fell 0.4% in June to $ 962.9 billion, the lowest level since October 2017.

This followed a decline of 0.3% the previous month. Investment in private residential projects fell 0.5% in June after remaining unchanged in May.

Housing construction remained weak, even as mortgage rates fell sharply from last year 's high levels. Spending on residential construction contracted for six consecutive quarters, the longest since the Great Recession.

Expenditures for non-residential private structures, which include manufacturing and power plants, fell 0.3% in June, after declining 0.6% the month before. Private non-residential investment declined for three consecutive months.

Investment in non-residential construction fell at its fastest pace in more than three years in the second quarter, helping to dampen economic growth at an annualized rate of 2.1%. The economy grew at a rate of 3.1% in the first quarter.

In June, investment in public construction projects fell 3.7%, the largest decline since March 2002, after a 1.2% decline in May. Expenditures on state and local government construction projects declined 4.1%, also the largest decrease since March 2002. This decline follows a 0.9% decline in May.

Expenditures on federal construction projects rebounded 2.6% in June, following a 5.6% drop the month before.

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