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Survey: US factories expanded in June, but pace slowed from May; production index slips

In this March 26, 2014 photo, Jerry Drury works on a truck engine assembly line at Volvo Trucks' powertrain manufacturing facility in Hagerstown, Md. The Institute for Supply Management, a trade group of purchasing managers, issues its index of manufacturing activity for May on Tuesday, July 1, 2014. (AP Photo/Patrick Semansky)

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In this March 26, 2014 photo, Jerry Drury works on a truck engine assembly line at Volvo Trucks' powertrain manufacturing facility in Hagerstown, Md. The Institute for Supply Management, a trade group of purchasing managers, issues its index of manufacturing activity for May on Tuesday, July 1, 2014. (AP Photo/Patrick Semansky)

WASHINGTON - U.S. manufacturing grew in June for the 13th straight month. But the pace of the expansion slowed from May.

The Institute for Supply Management said Tuesday that its manufacturing index dipped to 55.3 in June from 55.4 in May. Any reading higher than 50 signals that manufacturing is growing.

The trade group of purchasing managers said that orders rose at a faster pace last month compared with May. But growth in production and exports slowed. A measure of employment shows that factories added jobs for the 12th straight month; the pace of hiring last month was the same as in May.

Fifteen of 18 manufacturing industries grew in June, led by furniture makers and mineral producers. Textile, chemical, and plastics and rubber manufacturing contracted in June.

Last week, the Commerce Department reported that orders for U.S. durable goods fell 1 per cent in May, dragged down by a drop in demand for military equipment. Excluding defence-related goods, orders rose. And in a good sign for future business investment, orders for core capital goods rose 0.7 per cent.

Increased spending by businesses would give the economy some momentum after it got off to a bad start this year: The U.S. economy shrank at a 2.9 per cent annual rate from January through March. But economists blame the first-quarter drop on an unusually bitter winter and a sharp reduction in businesses' inventories. They expect economic growth to rebound to an annual pace of 3 per cent the second half of 2014.

The job market has been steadily improving. Employers added 200,000 jobs in May for the fourth straight month, longest such stretch since 1999. Factories added 10,000 jobs in May.

In a research note, analysts at Stone McCarthy Research Associates said the ISM survey's employment measure is "consistent with further gains in manufacturing payrolls." They forecast that factories added another 10,000 jobs in June.

The government's employment report for June comes out Thursday.

Economists have been worried about the fallout from slower economic growth in China. But a survey out Tuesday showed that Chinese manufacturing grew in June for the first time in six months, though the expansion was weak. HSBC Corp. said Tuesday its purchasing managers index for China rose to 50.7 from May's 49.4 on a 100-point scale. Numbers above 50 signal growth.

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