June Manufacturing Falls, May Construction Spending Up

by Christopher Freeburn | July 2, 2012 2:07 pm

The Institute for Supply Management announced this morning that its manufacturing index dropped in June, the first contraction in almost three years[1].

Last month, the index fell from May’s reading of 53.5 to 49.7. Economists had predicted a dip, but the sharp drop fell considerably short of their estimate of 52 for June, Reuters noted.

June marked the first month since July 2009 that the index had sunk below 50. June’s decline is seen as yet another sign of a slowing U.S. economy.

Economists cited by Reuters said the lower-than-expected index reading signaled that the U.S. was slipping into the same economic slowdown as China and Europe, but rejected talk of a new recession, noting that the U.S. economy was still growing, albeit at an annualized rate of just below 1%.

The dip also increased the chances of a renewed round of quantitative easing by the Federal Reserve in order to boost the economy, analysts said.

In contrast to the falling ISM, the Commerce Department released a report showing that construction spending in May climbed to its best showing since December 2009, rising 0.9% to an annual rate of $830 billion.

That topped the prediction of economists, who had forecast a 0.2% increase in construction spending for May.

The government also revised upward April’s rise in construction spending to 0.6%

During May, private construction spending rose 1.6% while spending on residential projects climbed 3%. Spending on public construction slipped 0.4%, the fifth straight monthly decline.

  1. first contraction in almost three years: http://www.reuters.com/article/2012/07/02/us-usa-economy-manufacturing-idUSBRE8610QT20120702

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