Manufacturing in the U.S. expanded in June at a slowest pace this year as factories received fewer orders and demand from abroad cooled.
The Institute for Supply Management’s manufacturing gauge fell to 56.2 last month from 59.7 in May. A reading greater than 50 points to expansion, and the median forecast of economists surveyed by Bloomberg News was 59. A measure of new orders dropped to the lowest level since October.
Manufacturing is easing into a more sustainable pace of growth after leading the economy out of the worst recession since the 1930s. With production having already picked up, companies are facing less pressure to replenish inventories at the same time China’s economy slows and Europe is saddled with a debt crisis.
“There’s less catching up for the factory sector than earlier this year and the softness we’re seeing in the economy a little more broadly is resulting in diminished sales,” said Richard DeKaser, chief economist at Woodley Park Research in Washington.
Stocks fell and Treasury securities rose after the report. The Standard & Poor’s 500 Index dropped 1.4 percent to 1,016.84 at 10:37 a.m. in New York. The 10-year Treasury note gained, pushing down the yield to 2.89 percent from 2.93 percent last yesterday.
China and Europe
Other figures today showed slower manufacturing growth in China and Europe. China’s Purchasing Managers’ Index fell to 52.1 in June from 53.9 the previous month. A gauge of factory output in the 16-member euro region declined to 55.6 last month from 55.8.
The economic recovery in the U.S. is being accompanied by a labor market that’s taking time to improve and a struggling housing market. First-time filings for jobless benefits rose 13,000 last week to 472,000, Labor Department figures showed earlier today.
The number of contracts to purchase previously owned homes plunged a record 30 percent in May after a homebuyer tax credit expired, the National Association of Realtors said today in Washington.
Economists forecast the U.S. manufacturing gauge would fall to 59, according to the median of 81 projections in the Bloomberg survey. Estimates ranged from 55.9 to 61.2.
The ISM’s production index decreased to 61.4 from 66.6. The new orders measure dropped to 58.5 from 65.7.
The employment gauge decreased to 57.8 from 59.8. The measure of export orders declined to 56 from 62.
Federal Reserve policy makers last month said the labor market was “improving gradually.” Central bankers also reiterated a pledge to keep the benchmark interest at a record low for an “extended period” to help spur the economic recovery.
Factories have added 126,000 workers during the first five months of this year, matching the most successive gains since 2006, according to the Labor Department. Manufacturers added another 25,000 employees in June, economists said before tomorrow’s monthly jobs report from the Labor Department.
The measure of orders waiting to be filled dropped to 57 from 59.5. The index of prices paid decreased to 57, the lowest since November, from 77.5.
The inventory index rose to 45.8 from 45.6 in May. A figure lower than 50 means manufacturers are reducing stockpiles.
Some manufacturers in the U.S. are upbeat. 3M Co., the maker of 55,000 products from Post-it Notes to Scotch tape, this week projected second-quarter sales that topped analysts’ estimates as demand recovers.
Sales will be $6.6 billion to $6.75 billion, the St. Paul, Minnesota-based company said in a June 28 statement. Analysts predicted $6.56 billion, the average of eight estimates compiled by Bloomberg. Total-dollar sales are projected to rise 4 percent to 6 percent compared with the first quarter of 2010.
Caterpillar Inc., the world’s largest maker of construction equipment, will see revenue rise 25 percent this year on surging demand for equipment from the mining and energy industries in developing nations, Chief Executive Officer James Owens said last month.
“We’re coming back very strongly after the recession,” Owens told reporters after a conference in Lima. “We’ll see growth in oil, gas and coal because we need energy for these rapid-growth emerging countries that are driving the need for commodities.”