US manufacturing sector shrank for second month

WASHINGTON (AP) — U.S. manufacturing shrank for the second straight month in July, further evidence of an economy growing at a sluggish pace.

The Institute for Supply Management, a trade group of purchasing managers, said today that its index of manufacturing activity ticked up to 49.8, from 49.7 in June.

A reading below 50 indicates contraction. June was the first time the survey showed manufacturing contracted in three years.

Factories have been a key source of jobs and growth since the recession ended in June 2009. But the sector has shown signs of weakness in recent months.

The ISM's report points toward more slow growth, rather than another recession. The trade group says the index needs to fall below 43 to signal a recession is likely. The uncertain economic outlook has made consumers and businesses reluctant to spend, lowering demand for factory goods.