US Manufacturing shrinks as orders slow

Manufacturing unexpectedly contracted in November for the fourth month in the last six as factory managers grew more concerned about the potential economic toll stemming from the so-called fiscal cliff.

The Institute for Supply Management’s factory index fell to 49.5, the lowest since July 2009, from 51.7 in October. The median forecast in a Bloomberg survey called for 51.4. Fifty marks the dividing line between expansion and contraction. Construction spending in October jumped by the most in five months, another report showed.

Weaker overseas demand, less investment in equipment and the possibility of automatic tax increases and government budget cuts in 2013 are hurdles for companies making everything from apparel to machinery. With six months of stagnation in manufacturing, construction gains, reflecting a rebound in housing, are helping pick up some of the slack for the world’s largest economy.

“We could be doing a lot better than we are doing if we had a coherent fiscal policy,” said Ward McCarthy, chief financial economist at Jefferies & Co. Inc. in New York, one of two forecasters to project a contraction. “We have a recovery in housing that’s been underway for a year and a half now. More recently, it’s been picking up steam. This will help offset what’s going on in other places.”

Stocks trimmed gains after the report. The Standard & Poor’s 500 Index rose less than 0.1 percent to 1,416.27 at 12:42 p.m. in New York after climbing as much as 0.5 percent.

Bloomberg

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