U.S. manufacturing activity shrank for the second straight month in July, adding to evidence of slowing global growth.
The Institute for Supply Management, a trade group of purchasing managers, said Wednesday that its index of manufacturing activity ticked up to 49.8, from 49.7 in June, below market expectations for 50.2.
A level below 50 indicates a contraction in manufacturing activity. The ISM says only a fall below 43 would signal that a recession is likely.
June was the first time the survey showed manufacturing contracted in three years. The July report also showed factories hired in at a slower pace than June, with the ISM’s employment index falling to 52.0 from 56.6, while new orders declined more slowly.
And export orders fell to 46.5 from 47.5, the lowest level since April 2009.
Manufacturing has been a key source of growth in the U.S. since the recession ended in June 2009. But in recent months, factory activity has weakened along with the broader economy.
“While the U.S. manufacturing sector has outperformed its international peers over the past several months, it has not been immune to the recession in Europe, slowing growth in emerging markets and a loss of confidence at home, James Marple of TD Economics said in a commentary.
“The slight move up in the index, while positive, is not enough to assuage fears that growth is losing momentum into the dog days of summer.”
Job growth has slumped and U.S. and consumers and businesses have cut back on spending, lowering demand for factory goods. Europe's economic woes and slower growth in China, India and Brazil have reduced demand for American exports.
"The softness in manufacturing ... does not bode well for growth in the second half of the year," Jeremy Lawson, an economist at BNP Paribas, said in a note to clients.