Wall Street Journal (08/02/12) Neil Shah

The Institute for Supply Management’s index of manufacturing activity barely inched up to 49.8 from June’s reading of 49.7—which was the first contraction in the factory sector since July 2009, the beginning of the economic recovery. Readings under 50 indicate activity is shrinking instead of growing. Details of the ISM report suggested more sluggishness ahead. Order backlogs fell and businesses’ inventories surged, while a measure of new orders—an important gauge of future activity—rose only to 48 from 47.8, suggesting firms are dispatching old orders but not getting many new ones.

Exports dropped for a second consecutive month, while a gauge of factory employment—until now a bright spot—fell sharply to 52 from 56.6. That indicates that while firms are still hiring, they are worried about whether they will actually need workers. The global economic slowdown “is starting to impact us,” says Bradley Holcomb, chairman of the ISM’s manufacturing-survey panel. “I don’t see anything that suggests any major change [in manufacturing] over the next couple months.”