Manufacturing Activity Increases in June

[mrmatas2277]

By ADAM GELLER, AP Business Writer

NEW YORK - The manufacturing sector expanded for the 13th consecutive month in June, albeit at a slightly slower pace, an industry group reported Thursday.

The Institute for Supply Management said its manufacturing index declined to 61.1 last month from 62.8 in May. The new reading was somewhat lower than the 61.5 forecast by analysts.

But an index reading above 50 indicates expansion, while one below 50 indicates that manufacturing activity is contracting. The gauge has been above 50 since June of last year.

The June reading shows manufacturing growth has slowed slightly but is "still aggressive," said Norbert J. Ore, who heads ISM's survey committee.

"June represents a strong finish to the first half of the year, and the current picture is very encouraging for the third quarter as new orders and production are still growing significantly," he said.

In other economic news Thursday, the government issued reports on the labor market and construction activity.

The first showed that new first-time claims for unemployment insurance rose by a seasonally adjusted 1,000 to 351,000 for the week ending June 26. Economists had been forecasting a small decrease, but the figure continued to suggest that the pace of layoffs is moderating.

The Commerce Department (news - web sites) reported that construction spending increased 0.3 percent in May from April to a seasonally adjusted annual rate of $988.5 billion, an all-time monthly high. Analysts had forecast a 0.7 percent increase.

The ISM report, meanwhile, showed that of 20 industries in manufacturing, 17 enjoyed growth, led by instruments and photographic equipment, rubber and plastic products, wood and wood products and industrial and commercial equipment and computers.

Analysts were paying particular attention to the part of the report that tracks the prices manufacturers pay for materials, hoping to gauge inflation.

That sub-index declined from 86 to 81, meaning that manufacturers continue to pay higher prices, but that the rate of increase slowed somewhat.

The robust-but-slower growth signaled in the overall index was echoed in most of the other indicators tracked by ISM.

Its indicator of employment declined to 59.7 in June from 61.9 in May, showing that manufacturers continue to hire but more gradually.

ISM's measure of new orders declined to 61.1 last month from 62.8 in May, showing that orders to manufacturers continue to increase, but at a slower pace.

The same was true of ISM's production index, which decreased to 63.2 in June from 64.8 a month earlier.