(Reuters) – Manufacturing this month expanded at its slowest pace since late 2010, hobbled by weak overseas demand for American goods, though a rise in domestic orders helped cushion the blow.
Financial information firm Markit said on Tuesday its U.S. “flash” manufacturing Purchasing Managers Index for July fell to 51.8 from 52.5 in June. July marked the fourth consecutive month of slower growth and the sector’s weakest showing since December, 2010.
The index remained above 50, indicating factory activity continued to expand, only less rapidly.
New orders for exports fell outright for the second straight month, the first back-to-back decline in nearly three years, Markit said, as recession in Europe dented demand.
“The U.S. manufacturing sector is clearly struggling under the pressure from falling exports,” said Chris Williamson, chief economist at Markit. “Reassuringly, domestic demand appears to be showing ongoing signs of resilience, encouraging firms to take on more staff.”
When including domestic demand, new orders grew, though the reading of 51.9 showed the pace of growth slowed. June’s tally was 53.7. The employment index rose to 52.9 in July from 52.8.
Even so, economists worry that the broader U.S. economy, which grew at a 1.9 percent rate in the first quarter, has since lost momentum. A poll of 74 economists polled by Reuters expects April-to-June growth to have slowed to 1.5 percent.
Last year, manufacturing had been something of a bright spot in an atmosphere of otherwise sluggish growth, but it too has showed signs of slowing over the last few months.
The Labor Department said employers added fewer than 100,000 new jobs in June for the third consecutive month.
Williamson said there are more clouds on the horizon.
“Overall, the third quarter is so far shaping up to be worse than the second quarter in terms of growth, which is a growing concern for policymakers,” he said.
Wall Street is bracing for another round of monetary easing from the Federal Reserve before the year ends. The median forecast in a July poll of 16 primary dealers showed a 70 percent chance of more action.
The “flash,” or preliminary reading, is based on replies from about 85 percent of the U.S. manufacturers surveyed. Markit’s final reading will be released on the first business day of the following month.