FEARS THAT the US recovery is losing steam were reinforced yesterday as a stream of new data on the health of the economy, from manufacturing to housing to the labour market, came in below expectations.
Growth in the manufacturing sector appears to be slowing and one indicator showed the first possible signs of damage to US exporters from the European sovereign debt crisis.
The Institute for Supply Management’s overall manufacturing index fell from 59.7 in May to 56.2 in June, a much larger drop than predicted by economists, who were looking for a reading of 59.
Although any reading above 50 indicates an expansion in manufacturing activity, this is now the second consecutive monthly drop. Some components of the survey were particularly discouraging, with the employment and new orders gauges dropping.
New export orders, which had been consistently above 60 in recent months, fell back to 56, which could be an early sign that the drop in the value of the euro and weaker European demand will hurt US producers.
The National Association of Realtors reported that pending home sales, a measure of activity in home purchases that have been agreed but not completed, tumbled by 30 per cent in May, much worse than the 12.5 per cent drop predicted by economists. A decline was widely predicted but the extent has brought renewed fears of a housing double-dip.
“Demand has fallen off a cliff in the wake of the tax credit expiration,” said Mike Larson, interest rate and real estate analyst at Weiss Research. “With so many Americans unemployed or underemployed, the housing market is going to keep hurting.”
Ahead of today’s monthly jobs report, weekly jobless claims figures were also weak. The number of people seeking first-time jobless benefits rose last week by 13,000 to 472,000, while the less volatile four-week moving average rose slightly to 466,500.
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