Still-shrinking manufacturing sector improves in July

NEW YORK -- A private-sector measure of U.S. manufacturing activity declined last month at the slowest pace since August, and production jumped to its highest level in more than two years as manufacturers worked to restock customers' bare shelves, another sign that the recession may soon be over.

The Institute for Supply Management, a trade group of purchasing executives, said Monday that its manufacturing index read 48.9, up from 44.8 in June. That's better than the 46.2 reading analysts polled by Thomson Reuters expected.

"If we stay on trend ... we would expect to be above 50 next month," said Norbert Ore, chairman of ISM's manufacturing survey committee. A reading above that threshold would indicate growth in manufacturing, something that hasn't happened since January 2008.

The pace of decline has been slowing since the index hit a 28-year low of 32.9 in December. And it was the third straight monthly reading above 41.2, which tends to indicate expansion in the overall economy if sustained at such levels, according to the ISM.

The moderating decline in U.S. manufacturing mirrors improvements in the industrial sectors in China, Britain and Europe.

In July, new orders and production hit their highest levels since the summer of 2007, while new export orders tipped into growth territory after shrinking for nine months.

The manufacturing prices paid index climbed to 55.0 in July, its highest since August 2008, from 50.0 in June, while the employment index rose to 45.6, also the highest since August, from 40.7 in June.

"These are all very good numbers. They are all indicative of things getting back to some resemblance of normalcy," said Robert Brusca, chief economist at Fact and Opinion Economics in New York.

In another report, construction spending beat expectations and rose 0.3% in June, with the spending rate for public buildings reaching a record high.

Analysts polled by Reuters had forecast construction spending to fall 0.5%, after dropping 0.8% in May, which was originally reported as a decline of 0.9%.