US manufacturing likely grew at a slower pace last month, as weakness overseas hits exports

EnergyAssociated Press

The Institute for Supply Management reports on a survey about U.S. manufacturing production, orders and other activity in February. The trade group of purchasing managers will release its manufacturing index at 10 a.m. Eastern Monday.

SLIGHT FALL: Economists forecast that the index slipped a bit in February to 53.2 from 53.5 in the previous month, according to a survey by FactSet. That would be the fourth straight drop. Any reading above 50 signals growth.

Continue Reading Below

Factory output is growing, but at a slower pace so far this year than in most of 2014. The manufacturing index reached a three-year high of 58.1 in August.

SLOWER BUT STEADY: Manufacturers have been held back in recent months by weak growth in China, Europe and Japan. That's been partially offset by strong consumer demand at home.

Businesses and consumers globally are ordering fewer U.S. goods. Export orders fell in January, according to last month's ISM survey. And the strong dollar, which makes U.S. exports more expensive, has also been a drag. The trade gap widened in the final three months of last year, subtracting 1.1 percentage points from the economy's growth rate.

The stronger dollar also lowers U.S. multinational corporations' overseas profits.

Another drag has come from U.S. businesses, which are investing less in industrial machinery and other equipment. Oil drilling firms are spending less on developing new fields as the price of oil has plummeted roughly 50 percent since last June. Business investment in equipment rose just 0.9 percent in the fourth quarter, the government said Friday.

On the brighter side, lower gas prices have left Americans with more money to spend on other goods and services. Consumer spending jumped by the most in nine years in last year's fourth quarter.

That is keeping some factories busy. Auto sales jumped 14 percent in January from a year earlier, the best January sales in nine years. Analysts expect sales will top 17 million this year for the first time in a decade.

Greater production of consumer goods, such as furniture, computers and clothing, pushed up factory output in January, according to the Federal Reserve.