A few signs point to later economic revival

TEMPE, AZ — The U.S. manufacturing economy remained sluggish, declining slightly in June, but growth in new orders, production and export orders could be an encouraging sign that the sector is poised for a turn-around later this year, according to a monthly canvass of the nation's purchasing managers.

The Institute for Supply Management's (ISM) monthly index of manufacturing activity came in at 49.8, up 0.4 percentage points from last month, and just beneath the benchmark level of 50.0. A reading of 50.0 or better indicates growth in manufacturing, while anything below points to a retrenchment.

"While the overall economy appears to be in a recovery, the manufacturing sector failed to grow in June," said Norbert Ore, chairman of the ISM's Business Survey Committee. "However, the improved showing of the New Orders, Production and New Export Indexes is encouraging as it appears that manufacturing is positioned for a recovery in the second half."

Purchasing managers are growing bullish of late as the overall economy shows signs of turning. "The mood of the survey respondents has definitely turned upbeat, and is evidenced by the fact that nine industries reported growth this month."

Putting some pressure on the bottom line, the prices that manufacturers paid for raw materials and supplies climbed higher in June. But on the up-side, said Ore, it was a short list of commodities reported up in price.

During May, said Ore, a number of manufacturing indicators started to improve, "and this month we see further strengthening of these indexes. This is certainly encouraging for the second half."

In a particularly hopeful sign, the New Orders Index grew in June for a second straight month with a reading of 52.2 up modestly from 51 0 in May. The Production Index improved for a third straight month, coming in at 52.9, up from 51.5 in May, 47.0 in April and 46.3 in March.