HON Honeywell International Inc

WASHINGTON—A closely watched gauge of U.S. factory activity slipped in April but continued to signal growth in the manufacturing sector, which has been battered by low oil prices and a strong dollar.

The Institute for Supply Management on Monday said its index of manufacturing activity fell to 50.8 in April from 51.8 in March. A reading above 50 indicates that factory activity is expanding while a reading below 50 points to contraction.

Economists surveyed by The Wall Street Journal had expected an April reading of 51.2.

Industrial output has weakened since the end of 2014 as low oil prices depressed domestic energy production and export demand faltered due to weak growth overseas and the strong dollar, which makes U.S.-made goods more expensive for foreign customers.

The Federal Reserve's industrial-production index fell 2% in March from a year earlier, reflecting sharp declines in mining and utility output. Manufacturing production rose a modest 0.4% from March 2015. The ISM factory gauge fell to 50 last September and slipped into contractionary territory for the next five months.

The pressure on manufacturers may be easing. Oil prices have moved higher in recent months. The dollar has weakened as Fed policy makers signaled a willingness to move slowly on raising short-term interest rates. Worries about economic growth overseas, especially in China, have diminished somewhat though they haven't disappeared.

There remain mixed signals for factory activity around the world. Markit on Monday said its eurozone manufacturing-activity gauge ticked higher in April, signaling continued modest expansion, but the data provider saw factory conditions deteriorating last month in Japan and Brazil.

"I'm hopeful that there's a global economic rebound, but we're certainly not going to count on it," Honeywell International Inc. Chief Executive David Cote told analysts last month. "Right now, we're going to stay with this whole idea that this is a slow-growth global environment."

Write to Ben Leubsdorf at ben.leubsdorf@wsj.com

(END) Dow Jones Newswires

May 02, 2016 10:55 ET (14:55 GMT)

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