June Manufacturing Index Still Shows Contraction

U.S. manufacturing contracted in June for the fourth straight month, the Institute for Supply Management said Tuesday, suggesting to analysts that factories are wary of boosting production until demand strengthens, Bloomberg reported.

ISM's index was 49.8 last month, compared with 49.4 in May. A reading below 50 signals contraction.

Economists had forecast a reading of 51 in the factory index, Bloomberg said. Manufacturing accounts for about 20% of U.S. economic production and is one of trucking’s largest and most important customer segments.

In other report released Tuesday, U.S. construction spending fell 1.7% in May, the biggest drop in a year, the Commerce Department said.

Construction spending is an important number for the trucking industry because construction increases the demand for flatbeds to deliver building materials and for dry van services to deliver appliances and furniture.

Spending fell to a seasonally adjusted $869.8 billion, Commerce said, as residential construction fell 0.9%. In addition, government spending on big public works projects declined to it lowest level in nearly a year.

Analysts had expected a 0.4% increase, Reuters reported.

Meanwhile, manufacturing capacity is close to a 20-year low, giving factories little incentive to order new equipment to expand, Bloomberg said. Consumer and overseas demand need to accelerate before business investment strengthens and manufacturers become confident enough to hire workers.

However, economists told Reuters that index appears poised to move higher during the second half of the year.

Tempe, Az.-based ISM surveys more than 400 companies in 20 industries, including clothing, printing, transportation, furniture and plastics.

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