Manufacturing slows in June, still shows growth

NEW YORK — An industry trade group's manufacturing index slipped in June, but was still at a level that suggests growth in the industrial sector.

The manufacturing sector has been one of the U.S. economy's bright spots for nearly a year as companies restock inventories and replace old equipment.

The Institute for Supply Management said its index fell to 56.2 last month from 59.7 in May.

That was a steeper drop than economists expected. They were looking for a reading 59 for last month, according to a survey by Thomson Reuters.

A reading above 50 indicates expansion.

But the upward momentum is slowing worldwide. Surveys released Thursday in China showed a slowdown in factories' growth as exports faltered and analysts worry that cutbacks in government lending will cool the economy's rapid rise. Reports from Markit Economics also indicated that manufacturing sector growth in India, South Korea, Australia and Taiwan was slowing.

The industrial sector's surge also cooled slightly in the 16 countries using the euro and the United Kingdom.

ISM's report showed that in the U.S., new orders and production are not growing as fast as they had been. Strength in new orders, which signal future production, hit a five-year high in January.

The report still suggests that manufacturers plan to hire more, but that measure has also weakened slightly.

The high level of productivity of industrial companies has restrained hiring. Manufacturers shed more than 2 million jobs in the recession, and have added back just 126,000 jobs this year.

"We are now 11 months into the manufacturing recovery, and given the robust nature of recent growth, it is not surprising that we would see a slower rate of growth at this time," said Norbert Ore, chair of ISM's survey.

Thirteen of the 18 industries surveyed said they were expanding in June, while four said they shrank and one reported the same pace of activity.