WASHINGTON — U.S. manufacturing shrank in June for the first time in nearly three years, a troubling sign that the economy is faltering.
The Institute for Supply Management, a trade group of purchasing managers, said Monday that its index of manufacturing activity fell to 49.7. That’s down from 53.5 in May and the lowest reading since July 2009, one more after the recession officially ended.
Readings below 50 indicate contraction.
Stocks, which had largely been flat when the market opened, fell immediately after the report was released at 10 a.m. The Dow Jones industrial average dropped 37 points.
The most troubling sign in the report was a sharp drop in a measure of new orders. The gauge plunged by the most in a decade, from 60.1 to 47.8. That’s the first time it has fallen below 50 since April 2009, when the economy was still in recession.
And a gauge of production also fell to its lowest level in more than two years.
U.S. factories are also reporting much less overseas demand, likely because Europe’s financial crisis has lowered demand for U.S. exports. A measure of exports dropped to 47.5, its lowest level since April 2009.