NEW YORK: US manufacturing activity grew last month, rebounding from an unexpected contraction in May, but hiring in the sector was the weakest in nearly four years, underscoring the challenges still facing the American economy.
Construction spending, meanwhile, neared a four-year high in May, though difficulties in the commercial real estate and factory sector kept recovery in the sector sluggish.
The Institute for Supply Management (ISM) said yesterday its index of national factory activity in June rose to 50.9 from 49.0 in May, a touch above of expectations of 50.5. A reading above 50 indicates expansion in the sector.
The gauge for new orders rose to 51.9 from 48.8, while production jumped to 53.4 from 48.6, helping the overall index bounce back from May’s contraction - the first in six months.
“It’s nice to see manufacturing moving back into growth territory from contraction,” said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania. But a measure of employment fell to 48.7, the lowest reading since September 2009. It stood at 50.1 in May.
That could feed concern about the strength of the US recovery, particularly now that the Federal Reserve has said it is considering scaling back its massive stimulus programme.
“Unfortunately on the employment side, they are not hiring,” Naroff said. “That’s not a good sign. The employment issue is key. If those jobs are not there, you are not going to get consumer demand.”
Growth in the overall manufacturing sector helped US stocks start the third quarter on a positive note, with major indexes rising one percent.
Reuters
