Industry shrink continues

July 8, 2003

U.S. manufacturing continued to shrink in June and construction spending dropped in May by the largest amount in a year.

The Institute for Supply Management (ISM) said Tuesday that its widely watched manufacturing index was at 49.8 last month, up from 49.4 in May. A reading under 50 indicates shrinking activity.

The Commerce Department reported that the seasonally adjusted annual value of construction projects under way in May was $869.8 billion, a 1.7% decline from April. Spending on big public works projects declined to its lowest level in nearly a year.

Manufacturing has been the weakest link in the economy's struggle to get back to full speed. The sector has throttled back production and cut jobs because of weak demand and competition from imports.

The ISM's index of employment in the manufacturing sector rose 3.2 point, but at 46.2 it still indicated shrinking employment for the 33rd consecutive month.

"Manufacturing may be finally stabilizing, though the sector has clearly not started to grow," said Joel Naroff, president of Naroff Economic Advisors.