The Institute for Supply Management reported this week that factory activity expanded at a slower pace in April, held back by weaker hiring and less company stockpiling.
The ISM manufacturing index slipped to 50.7, down from 51.3 in March. A reading above 50 indicates expansion but it was the weakest reading this year.
However, there are areas of strength. Last month, U.S. auto sales reached their highest level for any April since 2007. Sales grew 8.5 percent to nearly 1.3 million. And on Thursday, Ford Motor Co. said it will add 2,000 workers to a Missouri plant that makes the F-150 pickup because of surging demand for trucks.
But overseas demand has been weak, in part because of a recession among the 17 European countries that use the euro as their currency.Factories may also see slower sales this spring because consumers are starting to feel the impact of higher Social Security taxes. Americans increased their spending from January through March at the fastest pace in more than two years. But spending on goods fell in March, a possible sign that the tax increase may be catching up with consumers. Some economists believe that lower gas prices will help offset the higher Social Security payroll tax. The economy grew at an annual rate of 2.5 percent from January through March, the government said last week. While that was an improvement from the anemic growth of 0.4 percent in the final three months of last year, many economists expect growth will slow in the current quarter and remain subpar for most of the year.