Manufacturing Falls for 2nd Straight Month

In fresh signs of a slowing economy, a closely watched barometer of manufacturing health slipped for a second straight month in July and Americans’ incomes posted the weakest increase in 3 1/2 years.

Personal incomes rose just 0.2% in June, the Commerce Department reported Monday, while consumer spending climbed a sharp 0.6%. The combination of strong spending and weak income growth pushed the personal savings rate down to an all-time low of 0.2%.

The big dip in incomes reflected a $2-billion drop in wages because of the General Motors Corp. strike. The GM strike, settled last week, also was a factor in pushing down the National Assn. of Purchasing Management’s index for the second straight month.

The manufacturing index fell to 49.1 in July from 49.6 in June. The June decline was the first setback after 22 straight months above the 50 mark, the dividing line between a manufacturing sector that is growing and one that is shrinking.

In addition to the GM strike, the U.S. economy is being buffeted by the Asian financial crisis, which has cut into exports of manufactured goods and agricultural commodities.

The government reported last week that the overall economy slowed sharply in the spring with the gross domestic product rising at an annual rate of just 1.4%, down from 5.5% growth in the first quarter.

Analysts said Monday’s new reports were a further indication that economic growth will be much slower in the second half of this year.

“We won’t see either dramatic growth or recession, just slow and steady economic expansion,” predicted Jerry Jasinowski, president of the National Assn. of Manufacturers.

A third economic report showed that Asia’s troubles, while hurting manufacturing and farmers, have been a boon to the construction industry by triggering a flood of foreign money into U.S. markets, thus pushing down interest rates.

Those low rates helped boost construction spending by 1.7% in June, the biggest advance in more than a year, as single-family residential construction hit an all-time high.

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Purchasing Managers Index

July: 49.1

Source: National Assn. of Purchasing Management