Troubling Indicators At U.S. Factories
Shrinking Manufacturing Suggests Faltering Economy
WASHINGTON — U.S. manufacturing shrank in June for the first time in nearly two years, a troubling sign that the economy is faltering.
The Institute for Supply Management, a trade group of purchasing managers, said Monday that its index of manufacturing activity fell to 49.7. That’s down from 53.5 in May and the lowest reading since July 2009, one month after the recession officially ended.
Readings below 50 indicate contraction.
A measure of new manufacturing orders fell below 50 for the first since April 2009. And a gauge of production also fell to its lowest level in more than two years.
U.S. factories are also reporting much less overseas demand, likely because Europe’s financial crisis has lowered demand for U.S. exports. A measure of exports dropped to 47.5, its lowest level since April 2009.
A gauge of employment edged down but remained at a healthy level of 56.6. That suggests factories may still be adding jobs. Manufacturers have reported job gains for eight straight months.
The sharp drop in factory activity overshadowed a positive report on U.S. construction spending, which offered more evidence of a slow recovery in the housing market.
Factories have been a key source of jobs and growth since the recession ended almost three years ago. But the sector has shown signs of weakness in recent months.
Manufacturers produced less in May than in April, the Federal Reserve said this month. Automakers cut back on output for the first time in six months. In June, manufacturing activity barely grew in the New York region and contracted sharply in the Philadelphia area, according to surveys by regional Federal Reserve banks. Factory output ticked up in Chicago but only after sliding for three months.
Factories have been a key source of jobs, growth since the recession ended. But recently the sector has shown some weakness.