INSTANT VIEW: Manufacturing shrank slightly in August
NEW YORK (Reuters) - U.S. factory activity unexpectedly shrank slightly in August while inflation pressures also eased, according to an industry report released on Tuesday.
U.S. construction spending fell a steeper-than-expected 0.6 percent in July as private home building touched its lowest rate in more than seven years, a Commerce Department report showed on Tuesday.
KEY POINTS:
ISM
* The Institute for Supply Management said its index of national factory activity edged lower to 49.9 in August from 50.0 in July, the level separating contraction from expansion.
* Economists had expected an unchanged reading of 50.0, according to the median of their forecasts in a Reuters poll. The 82 forecasts ranged from 47.8 to 52.0.
CONSTRUCTION SPENDING
* Spending on construction in July fell to a seasonally adjusted annual rate of $1.084 trillion, the lowest since February.
* However, spending for June was revised to an increase of 0.3 percent from the 0.4 percent decline originally reported. Analysts polled by Reuters ahead of the report were expecting a 0.4 percent decrease in construction spending in July from June's initial reading.
* Private home building was off 2.3 percent in July, the 16th consecutive decrease, bringing private residential construction to the lowest level since March 2001.
COMMENTS:
MARK VITNER, ECONOMIST, WACHOVIA SECURITIES, CHARLOTTE, NORTH CAROLINA:
"I was a little surprised that it was not a bit stronger. These numbers are part of the overall picture showing we are on the precipice of recession, not really in it. Prices paid are moving in the right direction, but still remain high."
JIM PAULSEN, CHIEF INVESTMENT OFFICER, WELLS CAPITAL MANAGEMENT, MINNEAPOLIS:
"Among the more interesting aspects of the data was that exports went up. The story had been that exports were fading, but now they're right back up. And the import numbers are still below 50, so you have that same trend that's been driving the growth rate in the second quarter still at work in the third. The employment component gave back some of the gains from the previous month, but it's encouraging that it did not drop off sharply. Not a bad report overall."
MARKET REACTION:
STOCKS: U.S. equity indexes steady at higher levels
BONDS: U.S. Treasury prices steady at lower levels
DOLLAR: U.S. dollar trims gains
RATE FUTURES: Fed fund futures were steady, pricing in a 10 pct chance of a rate hike in September.
