U.S. Manufacturing Sector contracts in June image

The global slowdown is hitting U.S. manufacturers hard.

U.S. manufacturing shrank in June for the first time in nearly three years, a troubling sign as evidence builds that economic growth is slowing.

The Institute for Supply Management’s index of national factory activity fell to 49.7 from 53.5 the month before, missing expectations of 52.0, according to a Reuters poll of economists, and below even the lowest forecast.

“The ISM number strongly suggests that we’ve got a long haul before we see improvement in the economy and oil demand,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

“Economic data combined with the spike on Friday are going to convince people to get out of the market.”

ismmanufacturing-070212Rob Carnell, economist at ING bank, said the survey was “substantially weaker than forecast, which will raise expectations for some further stimulus from the Fed” even though the central bank had just announced an extension of its Operation Twist, the buying and selling of US bonds in an attempt to drive down long-term borrowing costs.

The inventories index slipped to 44.0 in June from 46.0 in May, while the backlog of orders index dipped to 44.5 from 47.0.

Exports fell to 47.5 from 53.5 and ISM said companies expressed concerns that “demand may be softening due to uncertainties in the economies in Europe and China.”