Reuters (07/02/12) Leah Schnurr

Manufacturing declined in June for the first time in nearly three years as new orders plummeted, according to a report from the Institute for Supply Management. Businesses saw solid sales but said that they sensed a shift in overseas demand. That helped drive down new orders and could constrain economic growth over the next quarter. The organization’s index of national factory activity fell to 49.7 from 53.5 the month before, missing expectations of 52.0, according to a Reuters poll of economists, and below even the lowest forecast.

“Clearly this is the biggest sign yet that the U.S. is catching the slowdown that is well under way in Europe and China,” says Paul Dales, senior U.S. economist at Capital Economics in London. Dales adds that the report is consistent with an economy that is growing at an annualized rate of a little below 1% after 1.9% growth in the first quarter, dismissing talk that the number signals a new U.S. recession is coming. A reading below 47 would be consistent with another recession, Dales says.