U.S. Manufacturing Grows Slowest

Suzanne Heinen discusses U.S. products with Ralph Bean

Manufacturing probably expanded in June at the slowest pace in eight months, indicating the industry may provide less support for the U.S. expansion, economists said before a report today.

The Institute for Supply Management’s factory index fell to 52 from 53.5 the prior month, according to the median estimate of 60 economists surveyed by Bloomberg News. Readings greater than 50 signal growth. Construction spending increased in May for a third month, separate figures may show.

Assembly lines may slow as consumers temper purchases of vehicles and other goods, while companies limit investments on new equipment. At the same time, export markets for manufacturers like DuPont Co. (DD) and Steelcase Inc. (SCS) may be more difficult as Europe struggles with a debt crisis and some Asian economies weaken.

“We’ll be moving forward at a more sedate pace,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “The momentum is fading for exports, which used to be a big plus for manufacturing. There’s not enough strength in domestic demand.”

The Tempe, Arizona-based ISM’s figures are due at 10 a.m. New York time. Estimates in the Bloomberg survey ranged from 50.5 to 53.1.

At the same time, the Commerce Department may report construction spending climbed 0.2 percent in May, according to the Bloomberg survey median.

Projections ranged from a drop of 0.8 percent to a gain of 1 percent. The data may show that housing is stabilizing with the help of record-low mortgage rates and cheaper properties.

Manufacturing accounts for about 12 percent of the economy and has been at the forefront of the recovery that began in June 2009.

The latest regional reports reinforce a recent slowdown in the industry. Manufacturing in the Philadelphia area shrank in June at the fastest pace in almost a year, while New York-region factories expanded at the slowest rate in seven months.

A Commerce Department report on durables orders last week showed demand for non-defense capital goods excluding aircraft climbed 1.6 percent in May after a 1.4 percent decrease, helping allay concern that business spending will falter.

Slower hiring and an unemployment rate exceeding 8 percent may keep restraining household spending, which accounts for about 70 percent of the economy. Cars and light trucks sold at a 13.7 million annual rate in May, the weakest this year and down from April’s 14.4 million pace, Ward’s Automotive Group data showed.

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