Production weakens in June, sign of slowing economy

NEW YORK -- The nation's manufacturing sector weakened significantly in June, a further indication that the Federal Reserve's efforts to slow the economy by increasing interest rates are working.

The National Association of Purchasing Management said its production index fell to 51.8 percent in June from 53.2 percent in May. The figure was considerably lower than the 53 percent predicted by Wall Street analysts.

It was the lowest reading since 49.9 percent in January 1999.

The markets barely reacted to the report. In midmorning trading, both the Dow Jones industrial average and the Nasdaq composite index were each down less than 5 points.

Despite the decline in the index reading in June, the industrial economy is still growing, though at a slower rate.

Still, the figures are the latest evidence that the Federal Reserve policy-makers' six rate increases over the past year have begun to slow the economy. The Fed feared that unchecked growth would lead to inflation. Other reports have indicated a slowing in retail sales, as well as in home purchases.

Also Monday, the Commerce Department reported that spending on construction rose a surprising 0.1 percent in May as a jump in spending by the private sector on commercial buildings more than offset reduced outlays for residential and big government projects.

Spending on construction was at a seasonally adjusted annual rate of $809.3 billion in May, up from $808.2 billion in April.