Indiana Grain Company, LLC

Posted: 07/01/10

By: tomgrisafi

Manufacturing has been among the few bright spots in an otherwise dull economic recovery, but the torrid pace of expansion among manufacturers is moderating, according to the latest data from the Institute for Supply Management.

The ISM Manufacturing Index fell 3.5 points in June to 56.2, well shy of the consensus offered by Bloomberg of 59.0 and the lowest reading since December 2009. A reading of 50 marks the line between expansion and contraction.

"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." Robert Ore, chair of the ISM, said.

"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."

It does appear that the steepest part of the recovery curve is now past. Production growth slowed but remains robust, while new orders are still positive but grew at the slowest pace since October.

Exports growth also moderated while customer inventories, which remain tight, are not as thin as in May.

As companies replace depleted stockpiles, growing demand will have to take up some of the slack. If businesses pare back on purchases and consumer spending remains tepid, expect a further moderation in the manufacturing recovery at a time when talk of a double dip recession is growing louder.