Pace of factory activity slows

NEW YORK -- Manufacturing grew at a surprisingly slower pace in December, a month after construction spending jumped because of a pickup in highway and school building as well as projects that may be tied to recovery efforts in states hurt by 2005's hurricanes.

The economic reports were released yesterday, ahead of the minutes of a Federal Reserve policy making meeting that suggested the central bank may be close to halting interest rate increases. Stock prices rebounded after the release of the Fed meeting minutes. Treasury prices continued to climb after the minutes were published.

An industry group that surveyed business executives said manufacturing slowed in December as prices for fuel and raw materials fell. The Institute for Supply Management said its index fell to 54.2, from November's 58.1. A reading above 50 indicates the sector is expanding; below 50 indicates manufacturing activity is shrinking.

''Overall, still quite strong, but a bit disconcerting nonetheless," Ian Shepherdson, chief US economist at High Frequency Economics Ltd., said in a report about the ISM index. While he does not expect the report to mark the start of a ''sustained softening," Shepherdson said another ''softish report next month would be worrying."

Meanwhile, the Commerce Department reported that construction spending hit an all-time high in November amid government spending on schools, highways, and sewer systems. Total building activity rose to a record $1.146 trillion at an annual rate in November, up 0.2 percent from the October pace. Private construction rose by 0.2 percent to an all-time high of $892.4 billion, even though home construction was unchanged. November saw a 0.5 percent rise in nonresidential construction.