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U.S. Factories in a Funk

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WASHINGTON — Manufacturers had their weakest growth in two years in July, a sign that the economy could weaken this summer.

The Institute for Supply Management, a trade group of purchasing executives, said Monday that its index of manufacturing activity fell to 50.9 percent in July from 55.3 percent in June. The reading was the lowest since July 2009 — one month after the recession officially ended.

Any level above 50 indicates growth. The manufacturing sector has expanded for 23 straight months.

Still, new orders shrank for the first time since the recession ended. Companies slashed their inventories after building them up in June. Output, employment, and prices paid my manufacturers all grew more slowly in July.

The disappointing report on manufacturing is the first major reading on how economy performed in July. It suggests the dismal economic growth in the first half of the year could extend into the July-September quarter.

“The ISM manufacturing report for July is a shocker and strongly suggests that the disappointing performance of the economy in the first half of the year was not just temporary,” said Paul Dales, a senior U.S. economist for Capital Economics.

Stocks fell after the report was released but recovered most of the losses by closing. They had risen ahead of the report on the expectation that Congress will approve a deal Monday to increase the nation’s borrowing limit.

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

The factory sector has expanded in every month but one since the recession ended in June 2009. The ISM’s index topped 60 for four straight months at the start of the year.

But manufacturing has stumbled in recent months.

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