Manufacturing Shrinks for Second Month as Economic Mainstay Struggles

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By Lorraine Woellert - Aug 1, 2012 10:56 AM ET

Manufacturing in the U.S. unexpectedly contracted for a second month in July, showing a mainstay of the economy was struggling to improve as global economies weakened.

The Institute for Supply Management’s factory index was 49.8 last month, close to the three-year low of 49.7 reached in June. Fifty marks the dividing line between expansion and contraction. Economists surveyed by Bloomberg News projected a reading of 50.2, according to the median estimate.

Cutbacks in household purchases, unemployment exceeding 8 percent, Europe’s debt crisis and slower global growth threaten to further restrain an industry that’s been a source of strength for the economy. Factories may also temper production as companies curb spending out of concern that lawmakers will fail to prevent automatic government spending cuts and higher taxes from going into effect next year.

“It really reconfirms the challenges the global economy is facing,” said Sam Bullard, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “We’ve seen slower growth in emerging markets, the recession in Europe -- all of that is still ever-present. Firms are holding pat right now.”

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http://www.bloomberg.com/news/2012-08-01/manufacturing-in-u-s-unexpectedly-contracts-for-second-month.html

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1. This is not good news.