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WASHINGTON: The US factory sector moved within striking distance of growth in July, a survey showed on Monday in another encouraging sign for the recession-gripped economy.
The Institute of Supply Management said its index of the manufacturing sector, also known as the purchasing managers (PMI) index, rose to 48.9 percent from 44.8 percent in June.
That figure was better than the level of 46.5 percent expected on Wall Street and closer to the 50 percent level that separates expansion and contraction.
The ISM said that although the factory sector contracted for an 18th consecutive month, the decline was modest and suggested the slump is ending.
"It would be difficult to convince many manufacturers that we are on the brink of recovery, but the data suggests that we will see growth in the third quarter if the trends continue," said ISM survey chief Norbert Ore.
Additionally, the survey showed the new orders and production sub-indexes growing, and that the headline index was pulled down by weakness in inventories and lingering declines in employment.
The new orders index increased to 55.3 from 49.2 percent, showing growth in factory orders, ISM said.
The production sub-index climbed to 57.9 from 52.5 percent, suggesting accelerating activity. The employment index was at 45.7 percent, still contracting, but better than the level of 40.7 percent in June.
Ryan Sweet at Moody's Economy.com said the report had positive implications, especially for the troubled employment picture.
"This is a strong signal that declines in non-farm payrolls are moderating," he said.
"The details are consistent with our forecast for both manufacturing and real GDP (gross domestic product) to rebound this quarter."
Ian Shepherdson at High Frequency Economics said that "the key number for us is new orders," at the highest level since June 2007.
"If the usual link between orders and the other components holds, we should see headline ISM at about 53 by September. That would be consistent with GDP growth at about 3.0 percent annualised. But ISM has persistently overshot in recent years so we are sticking to our 2.0 percent estimate for now."
The ISM said six of the 18 manufacturing industries reported growth in July - non-metallic mineral products; paper products; printing and related activities; electrical equipment, appliances and components; transportation equipment; and chemical products. - AFP/de
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