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Published: 7/2/2011 - Updated: 2 years ago

Data show production levels in U.S. up in June

Survey: Consumers' outlook remains bleak

REUTERS
Manufacturing activity recovered somewhat in June from a sharp slowdown in May, a private trade group said Friday. Growth had slowed sharply in May, however. High gas prices cut into consumer spending and there was an auto parts shortage stemming from Japan's March 11 earthquake. Manufacturing activity recovered somewhat in June from a sharp slowdown in May, a private trade group said Friday. Growth had slowed sharply in May, however. High gas prices cut into consumer spending and there was an auto parts shortage stemming from Japan's March 11 earthquake.
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NEW YORK -- The pace of growth in U.S. manufacturing picked up in June for the first time in four months, fueling optimism that the recent economic slowdown will be temporary.

But other data released Friday was less encouraging. Although lower gasoline prices helped temper the gloomy mood of consumers last month, a survey showed their economic expectations remained bleak.

While manufacturing has been a sweet spot in the recovery, consumer spending -- accounting for roughly 70 percent of economic activity -- is not at robust levels.

In a sign of lackluster spending, both Ford and General Motors Co. reported June U.S. sales that rose less than expected.

But the manufacturing report eased fears that the U.S. economic recovery could stay sluggish, though some economists cautioned it was too soon to tell if growth had turned a corner.

A fall in U.S. construction spending in May to a more than 10-year low also tempered the outlook.

Many economists and the Federal Reserve, which ended its latest round of monetary stimulus on Thursday as the second quarter ended, have insisted that obstacles to growth in the first six months of the year were temporary.

Forecasters see second-quarter growth at around 2 percent. The economy grew at a 1.9 percent pace in this year's first three months.

The biggest headwinds -- high energy prices and supply chain disruptions after Japan's March quake -- have eased. Japan reported earlier this week that factory output registered the biggest jump in almost 60 years in May as supply chains were restored.

The Institute for Supply Management said its index of national factory activity rose to 55.3 from 53.5 the month before, when it had hit its lowest level since September, 2009. The reading topped expectations for 51.8, a Reuters poll of economists showed.

A reading above 50 indicates expansion in the manufacturing sector. The employment gauge also rose, but new orders increased only slightly, and exports fell.



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