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ISM Index Shows Slowing Of Manufacturing Growth

Mon, 08/02/2010 - 4:29am

NEW YORK (AP) — As fears build that the recovery from the recession is petering out, analysts expect the manufacturing sector grew more slowly in July.

A swell of production in factories has helped lead the rebound for about a year as exports increased and companies rebuilt their stocks of supplies and goods.

Economists polled by Thomson Reuters forecast that the index from the Institute for Supply Management slipped to 54.1 in July from 56.2 in June.

A reading above 50 indicates growth. But momentum in the manufacturing sector has been slowing since spring as demand from consumers continues to lag investment from businesses.

The rebuilding of inventories that dwindled during the recession helped kick-start factory production last year. The inventory boom gave a big boost to economic growth in the last three months of 2009 and the first quarter of 2010. But economists expect that effect to wane in the second half of the year as consumers remain hesitant to spend and companies keep inventory levels tight.

Unemployment near 10 percent and low consumer spending is weighing on economic growth. The government said last week that second-quarter economic growth slowed to an annual rate of 2.4 percent from 3.7 percent growth in the first quarter.

In June, U.S. factories operated at 74.1 percent of capacity. That's significantly better than during the depths of the recession, when lack of demand idled plants, but it's still well below the average of the past four decades.

That means factories don't necessarily have to bring on lots of new full-time workers, especially given recent gains in productivity.

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