Fears for US economy as orders drop

Ben Southwood
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US manufacturing output fell for the first time in three years, industry data showed yesterday, raising fears that Europe’s recession is hitting American’s economic recovery.

The Institute for Supply Management’s purchasing managers’ index (PMI) collapsed to 49.7 in June from 53.5 in May, its lowest score since 2009.

The drop in the new orders index from 60.1 to 47.8 in just a month suggests severe future deterioration. A score below 50 indicates a fall in activity.

Paul Dales at Capital Economics said: “The plunge is clearly the biggest sign yet that the US is catching the slowdown well underway in Europe and China.

“But a reading of below 47.0 is required for another recession – the index is still consistent with an economy growing at an annualised rate of a little below one per cent.”

Ian Shepherdson at HFE went further: “The recession/growth boundary for the ISM is about 44.” He added: “The downshift in the new orders index is only one-tenth less than the plunge after 9/11.”

The dollar depreciated against the yen to ¥79.42 on the announcement, but rose on the euro to €0.79, as these gloomy manufacturing figures were outweighed by worries about the ongoing Eurozone debt crisis.