Factory Sector Posts July Gains

U.S. manufacturing expanded further in July, fueling more hiring, but outlays for U.S. construction fell unexpectedly in June to hint at a slowing of the housing boom, reports released Monday showed.

The Institute for Supply Management’s manufacturing index, which rose to 62.0 in July from 61.1 in June, suggested that a “soft patch” in the U.S. economy in June might have been the blip that Federal Reserve officials have suspected and not a change in direction. That should keep the central bank on track to continue raising interest rates.

“I’m not raising my expectations for the second half, but certainly July gets the second half off to a very strong start,” said Norbert Ore, chairman of the survey of purchasing managers at more than 350 industrial firms.

Any reading above 50 in the ISM index indicates growth. The index has been above 50 for 14 straight months and above 60 for the last nine months -- the longest stretch since 1973-74.

Outlays for U.S. construction fell in June 0.3%, the first drop in 16 months, the Commerce Department said. Analysts had looked for no change from May levels.

May’s spending was revised down to a 0.1% gain from a previously reported 0.3% advance.

The employment component of the ISM index slipped to 57.3 from 59.7 in June. Some analysts had feared a bigger drop after the Chicago purchasing managers’ survey Friday showed net job losses in the Midwest.

“The employment index, while it declined, remains incredibly strong,” said Mark Vitner, senior economist at Wachovia Securities in Charlotte, N.C.

ISM’s prices paid index eased to 77.0 from 81.0 as commodity prices fell back from recent highs. New orders, the engine behind potential hiring, rose to 64.7 from 60.0 in June. Inventories fell to 49.9 from 51.1.