NAPM Index, Construction Spending Fall

Economic reports on manufacturing activity and construction in the United States released on Tuesday showed that economy is still not close to a recovery.

The National Association of Purchasing Management reported a June vs. May drop in the purchasing index, while the Commerce Department said construction spending fell sharply in June.

oth of these reports are important because they reflect the health of trucking customers. Factories generate truck shipments of raw materials and parts coming in, and finished goods going out. Construction spending requires shipments of building materials, and leads to later shipments of appliances and home furnishings.

NAPM said its factory index fell to 43.6 in June from 44.7 in the previous month. The index is a gauge of work being performed in the United States, and a reading below 50 indicates a contraction. It has now remained in the 40s for a year.

The NAPM report is one of the first indications of economic activity in the manufacturing sector and is based on a survey of executives who buy the raw materials and supply for manufacturing at more than 350 industrial firms.

Analysts said the index has been hurt by an oversupply of telecommunications equipment that was created after business spending began to drop off last year, according to Bloomberg.

The example held up by the Bloomberg report is fiber optic giant, JDS Uniphase. The company's three largest customers have all announced that they are going to use existing stockpiles of fiber optic material before ordering more.

Also, the Commerce Department said in its monthly report that U.S. construction spending fell in June at its steepest rate in the last year. It totaled $861.6 billion in June, a drop of 0.7% from May.

According to Bloomberg, the amount fell well short of analysts predictions of a 0.2% increase for the month.