US factory activity expands in June

WASHINGTON (AP) – US manufacturing activity grew in June following a pickup in new orders, exports and production. Better economic growth overseas is boosting US exports and could help American factories rebound in the second half of the year.

The Institute for Supply Management said Monday that its index of factory activity increased to 50.9 in June. That’s up from 49 in May, which was the lowest reading in four years.

A reading above 50 suggests growth, while those below indicate contraction.

A measure of export orders jumped to 54.5 from 51. That may be a response to growth in Japan and some European countries, economists said.

Still, a measure of manufacturing employment fell in June to 48.7, its lowest level since September 2009. That suggests Friday’s June employment report will show factories cut jobs for the fourth straight month.

The improvement at US factories helped push stocks modestly higher for the day. The Dow Jones industrial average closed up 65 points.

Manufacturing had slowed this year after providing crucial support to the economy for the first three years after the recession ended in June 2009. Europe’s slump has weighed heavily on US exports. And businesses cut back on their investment in machinery and equipment in the first quarter.

“The ISM rebound suggested the worst may be past for the global trade slowdown that has contributed to a significant recent soft patch in US manufacturing,” Ted Wieseman, an economist at Morgan Stanley, said in a note to clients.

A report in Europe showed improvement in manufacturing activity in Britain, France and Italy and stabilization in Spain.

And large manufacturers in Japan reported a positive outlook for the first time in nearly two years. The quarterly “tankan” survey showed that the outlook for services firms also increased. The stronger readings indicate that businesses are pleased with Prime Minister Shinzo Abe’s efforts to revive the nation’s stagnant economy.

Still, China’s manufacturing sector weakened in June, according to two separate surveys. Factories there were hurt by falling orders from the US and Europe and by Chinese regulators’ efforts to slow lending.

Paul Dales, an economist at Capital Economics, says the growth at American factories suggests the US economy is improving enough for the Federal Reserve to slow its monthly bond purchases as soon as September.