Sequestration: Are Government Spending Cuts And Tax Increases Threatening Manufacturing Growth?

Category: Economy / Apr 01, 2013 5:56PM EDT
Wall Street fell on Monday after weaker-than-expected U.S. manufacturing growth weighed on sentiment. A monthly reading on the U.S. manufacturing sector came in at 51.3 in March, down from 54.2 in February, the Institute of Supply Management (ISM) said. The overall index has signaled expansion for four straight months, but the drop in February was bigger than economists expected. Could the decline suggest some companies may have been wary of steep government spending cuts from the sequestration that began on March 1? A separate report on Monday showed that activity in China's manufacturing sector accelerated in March, but still missed expectations. HSBC's manufacturing index rose to 51.6 from 50.4 in February, slightly weaker than its initial "flash" estimate of 51.7. Although momentum in global growth has been stabilizing, the twin PMI surveys suggest that the current economic rebound remains fragile due to the uncertainty of external demand in Europe. Other data reported by the Institute for Supply Management Monday showed U.S factories hired at the fastest pace in nine months. Purchasing managers' comments highlighted by ISM indicated that reduced government spending and uncertainty about federal regulations were among the reasons for the March slowdown. The Dow Jones industrial average fell 5.69 points or 0.04 percent, to 14,572.85, the S&P 500 lost 7.03 points or 0.45 percent, to 1,562.16 and the Nasdaq Composite dropped 28.35 points or 0.87 percent, to 3,239.17.