The Economy: Slower Growth In Manufacturing Raises Concerns
Manufacturing growth slowed sharply in July, undercutting an industrial rebound that had given many economists confidence in the broader economic recovery.</br></br>The Institute of Supply Management's index of manufacturing activity dropped to 50.5 for July from 56.2 a month earlier. The July reading, the lowest since January, suggests the manufacturing sector continued to grow, but just barely. A reading below 50 implies contraction in the sector.</br></br>Particularly disturbing in the July report was a sharp drop in an index of new orders, an indicator of future activity. The index, which had been suggesting a healthy growth in orders, posted its largest monthly drop since October, implying orders are now flat.</br></br>For many weeks, economists cited the manufacturing rebound as evidence the economy could continue to recover, despite growing uncertainty created by accounting scandals, falling stock prices and an uneven profit outlook. Overall industrial output increased for six straight months through June, according to the Federal Reserve. But uncertainty appeared to take its toll on manufacturers in July. It might just be a temporary pause, but, coming on the heels of weak economic-growth data, the news will heighten worries the recovery is in jeopardy.</br></br>"Some [supply executives] indicate that business is improving, but question whether it will continue," the report said. "Others are experiencing declines and question if we have hit the bottom." The index was based on responses from 280 executives who handle purchasing activity in industries ranging from textiles to electronics to steel. Many of the executives cited budget cuts, plans to move production to cheaper locations abroad and concerns about the outlook for the rest of the year.