NEW YORK - The overall economy grew for the thirty-seventh straight time, while the manufacturing sector contracted for the first time since July 2009, the Institute for Supply Management reported Monday.
According to the ISM's monthly report on business, the ISM index slipped to 49.7 in June from 53.5 in May.
Economists polled by Thomson Reuters predicted the index would slip to 52.0.
An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion. A reading of 50 shows the sector was unchanged in the month.
"The PMI registered 49.7 percent, a decrease of 3.8 percentage points from May's reading of 53.5 percent, indicating contraction in the manufacturing sector for the first time since July 2009, when the PMI registered 49.2 percent," said Bradley Holcomb, chair of the Institute of Supply Management's manufacturing business survey committee. "The New Orders Index dropped 12.3 percentage points in June, registering 47.8 percent and indicating contraction in new orders for the first time since April 2009, when the New Orders Index registered 46.8 percent. The Production Index registered 51 percent, and the Employment Index registered 56.6 percent. The Prices Index for raw materials decreased significantly for the second consecutive month, registering 37 percent, which is 10.5 percentage points lower than the 47.5 percent reported in May. Comments from the panel range from continued optimism to concern that demand may be softening due to uncertainties in the economies in Europe and China."
The closely watched prices paid index slumped to 37.0 from 47.5. The employment index was at 56.6, down from 56.9 the prior month.
The production index decreased to 51.0 from 55.6, the new orders index fell to 47.8 from 60.1; the supplier deliveries index climbed to 48.9 from 48.7; the export orders index declined to 47.5 from 53.5; and the imports index remained 53.5.
The inventories index slid to 44.0 from 46.0; the customers' inventories index rose to 48.5 from 43.5; and backlog of orders dropped to 44.5 from 47.0.
Respondents' comments included:
"Business is still strong, with some nagging question whether it will be sustained." (Machinery)
"The economy and general business seem to be getting better even though recent data say otherwise." (Fabricated Metal Products)
"Significant raw materials price correction underway." (Plastics & Rubber Products)
"Local labor market shows no signs of slowing down. Competition for technical services/skilled craft remains tight." (Petroleum & Coal Products)
"Overall demand signals from sales forecast are trending down in all regions." (Computer & Electronic Products)
"Although our shipments are up year over year and from prior month, we can feel some head winds, especially from Europe. We are watching our expenses very tightly and being cautious." (Apparel, Leather & Allied Products)
"Business continues to exceed forecast in all markets." (Primary Metals)
"Economy seems to be slowing slightly due to concerns in Europe; however, production has not changed a great deal." (Transportation Equipment)
"Business has started to show signs of slowing." (Furniture & Related Products)
"Slowing world economies, particularly China, are reducing 3Q and later orders and drastically dropping some raw material prices." (Chemical Products)