ISM's index of U.S. manufacturing activity fell to 50.9 in July from 55.3 in June, the weakest level since July 2009

Cindy Allen

WASHINGTON , August 1, 2011 (Associated Press) – Manufacturing activity barely grew in July, falling to the weakest level since just after the recession ended, a private trade group said Monday.

The Institute for Supply Management, a trade group of purchasing executives, said its index of manufacturing activity fell to 50.9 percent in July from 55.3 percent in June. It was the 23 straight month of growth. But the reading was the lowest reading since July 2009 -- one month after the recession officially ended. Any level above 50 indicates growth.

Stocks fell after the report was released. They had been trading higher ahead of the report, based on expectations that Congress will approve a deal Monday to raise the nation's borrowing limit.

The index topped 60 for four straight months earlier this year. But manufacturing has stumbled in recent months.

Economic growth slowed sharply in the first half of this year. The economy expanded at a dismal 1.3 percent annual rate in the April-June period, the government said Friday. That came after an even worse 0.4 percent increase in the first three months of the year.

The factory sector has been a driving force behind the economic recovery and has expanded in every month but one since the recession ended in June 2009. But manufacturing represents only about 11 percent of U.S. economic activity and can contribute only so much to the broader economic recovery.

A parts shortage stemming from Japan's March 11 earthquake disrupted automakers' supply chains, cutting into the output of new cars. And high gas prices left Americans with less money to spend on discretionary items, such as vacations, furniture and appliances.

The index fell in May to 53.5 from April's reading of 60.4. That was the sharpest one-month drop since 1984.

Employers have responded by pulling back on hiring. The economy added just 18,000 net jobs in June, the fewest in nine months, and the unemployment rate rose to 9.2 percent. The government issues its July employment report on Friday.

Several regional manufacturing surveys for the month of July have been mixed. The Philadelphia Federal Reserve Bank said its manufacturing index rose to 3.2, signaling that the sector is growing again in that region. It had contracted in June for the first time in nine months.

And a private survey in Chicago showed that manufacturing expanded in July, but at a slower pace than in June.

Meanwhile, a survey by the New York Federal Reserve Bank found regional manufacturing activity shrank in July.

The ISM, a trade group of purchasing executives based in Tempe, Ariz., compiles its manufacturing index by surveying about 300 purchasing executives across the country.

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