The U.S. manufacturing industry expanded for the 11th straight month in June, although most key indicators for the sector are experiencing a slowdown in the rate of growth following a recent surge.

The United States economy continued to rebound from the downturn in June, posting overall gains despite a still-struggling employment market. Growth in the manufacturing sector reflected these wider economic trends, also expanding in June, though the rate of growth in most key indicators was slower than in recent months.

According to the Institute for Supply Management’s latest manufacturing ISM Report on Business, released Thursday, the manufacturing industry grew for the 11th consecutive month in June, in line with the overall U.S. economy, which expanded for the 14th month in a row.

ISM’s monthly purchasing managers’ index (PMI), a key indicator for the factory sector, fell from 59.7 percent in May to 56.2 percent in June. Readings over 50 percent indicate growth. The 3.5-point drop in the PMI last month shows that although manufacturing continued to expand, the pace of growth has slowed following a six-year high in April and a slight decline in May. The PMI in June remained above the 55.7 percent 12-month average.

ISM’s new orders index also declined, falling from 65.7 percent in May to 58.5 percent in June, while monthly production dropped 5.2 points to 61.4 percent and prices fell by 20.5 points to 57 percent. The latest monthly data represent a significant slowdown in growth for these key indexes.

“We are now 11 months into the manufacturing recovery, and given the robust nature of recent growth, it is not surprising that we would see a slower rate of growth at this time,” according to Norbert J. Ore, chair of ISM’s Manufacturing Business Committee. “The sector appears to be solidly entrenched in the recovery.

“Comments from the respondents remain generally positive, but expectations have been that the second half of the year will not be as strong in terms of the rate of growth, and June appears to validate that forecast,” Ore continued.

According to the ISM report, 13 of the 18 manufacturing industries tracked recorded growth last month: plastics and rubber products; transportation equipment; printing and related support; computer and electronic products; electrical equipment, appliances and components; paper products; fabricated metal products; food and beverage products; furniture; petroleum and coal; nonmetallic mineral products; miscellaneous manufacturing; and chemical products.

Experts attribute much of the overall slowdown to a severe dip in pricing growth, caused partly by turmoil in international markets and export rates.

“Weakness in Europe is clearly an issue, as U.S. exports to that region are up only 5 percent this year, compared to 37 percent for the Pacific Rim and 26 percent to Canada and Mexico,” Thomas J. Duesterberg, president and CEO of the Manufacturers Alliance/MAPI, said in an analysis of the ISM report. “Looking ahead, we will need to see better support from domestic spending, including construction and investment, and stronger performance from key trading partners such as Europe, to sustain growth in the manufacturing sector.”

The manufacturing sector has been at the forefront of the U.S. economic recovery for most of the past year, but as global business activity begins to lose momentum after emerging from a steep decline, manufacturers are likely to see a corresponding decrease in growth.

“The economic momentum is also slowing worldwide. Surveys released Thursday in China showed a slowdown in factories’ growth as exports faltered and analysts worry that cutbacks in government lending will cool the economy’s rapid rise,” the Associated Press reports. “Reports from Markit Economics also indicated that manufacturing sector growth in India, South Korea, Australia and Taiwan was slowing.”

While it seems unlikely that sluggish expansion in international markets will reverse the general rebound in the U.S. economy, the latest data indicate that the recovery may be slower than many expected.

“So here’s where we stand. It doesn’t look like a double dip recession is imminent,” the Wall Street Journal explains. “But at the same time, it may be that the fastest rates of growth during this recovery are behind us.”

Earlier

Manufacturing Expands for 10th Month Straight

Manufacturing Grows at Fastest Pace in Six Years

Resources

June 2010 Manufacturing ISM Report on Business
Institute for Supply Management, July 1, 2010

MAPI Analysis on ISM Index: ‘Some Slowing’ but Trend Remains Positive
by Thomas J. Duesterberg
Manufacturers Alliance/MAPI, July 1, 2010

Manufacturing Slows in June, Still Shows Growth
by Tali Arbel
The Associated Press, July 1, 2010

ISM Shows Growth, but Slower
by Matt Phillips
The Wall Street Journal, July 1, 2010