telegraph.co.uk / By Richard Blackden / July 2, 2012
An index of manufacturing activity unexpectedly fell to 49.7 in June from 53.5 in May, the Institute for Supply Management said yesterday. A reading below 50 signals contraction and last month’s figure was lower than the most pessimistic forecast. The Dow Jones and the S&P 500 both fell as investors took the report as further confirmation that the world’s largest economy is losing the momentum it enjoyed at the start of the year.
“It’s a really terrible number,” said David Semmens, an economist at Standard Chartered.
There was little encouragement to be found in the majority of the smaller indices that made up the worrying headline figure. A measure of new orders dropped to 47.8 from 60, while prices paid slumped to 37 from 47.5. Overseas demand for US manufactured goods was also down, the ISM survey said.
Although manufacturing accounts for just 10pc of GDP, the sector has been one of the brightest parts of the economy since America emerged from recession in the middle of 2009.
It is also the part of the US economy where the effects of Europe’s recession and a slowing in Asian growth is most likely to show up first. Even before the release of yesterday’s report, investors had been unsettled by figures showing unemployment in the eurozone climbing to an 11-year high and separate data showing a manufacturing index in China weakening.