Manufacturing recovery slows

@CNNMoney August 1, 2011: 11:03 AM ET
ISM Manufacturing Index falls to 50.9 in July

NEW YORK (CNNMoney) -- The manufacturing sector nearly stood still in July, according to new data released Monday.

The Institute for Supply Management, a purchasing managers group, said Monday its manufacturing index fell to 50.9 in July, down 4.4 points from June.

It marked the sector's slowest growth since July 2009. Economists immediately called it "shockingly weak," "disappointing" and "not encouraging."

"The U.S. ISM manufacturing report for July is a shocker and strongly suggests that the disappointing performance of the economy in the first half of the year was not just temporary," Paul Dales, senior U.S. economist with Capital Economics, said in a research note.

A reading above 50 indicates the manufacturing sector is growing. While the index has been above that level for 24 straight months, a reading of only 50.9 shows very slow growth at best.

Economists surveyed by were expecting the number to come in at 54.

Economy grinds to halt as consumers pull back

In July, the reading on new orders -- which is forward-looking, slipped to 49.2, showing demand for future products is falling. It was the first time new orders had contracted since the recession ended in June 2009 -- a fact that Dales called "very worrying."

The employment component of the index also fell to its lowest level since 2009, but remained at a level showing modest growth in hiring, at 53.5.

Of the 18 manufacturing industries, 10 reported growth in July. The apparel, leather, plastics, textile, electrical equipment, food, machinery and chemical industries reported a contraction.

Stocks fell in mid-morning trading Monday following the weak manufacturing news. The markets had opened sharply higher due to optimism about the debt ceiling agreement reached over the weekend.

But the poor ISM number appears to be yet another sign of how tepid the economic recovery is. The government reported Friday that the gross domestic product for the U.S. rose at an annualized pace of just 1.3% in the second quarter. And the growth for the first quarter was revised down to a mere 0.4%. To top of page

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