ISM Report Shows Factories Remained Stagnant in June

U.S. manufacturing activity (search) was subdued in June as lingering anxiety over the economy's health precluded a full-throttle increase in output.

As factories kept firing workers, the Institute for Supply Management (search) 's national factory gauge edged up to 49.8 in June from 49.4 in May. The results, released Tuesday, fell short of Wall Street forecasts, which had pegged the figure at 51.0.

A number above 50 signals growth while a figure below that level points to contraction.

Still, ISM said the industrial sector was poised for a recovery in the second half of the year, adding that the mood of many firms "has definitely turned upbeat."

Analysts were not convinced.

"If the economy doesn't appear to be doing better than it is, the Fed may have to do something more to ensure the recovery takes hold," said David Resler, chief economist at Nomura Securities.

U.S. factories make up roughly one-sixth of the national economy but have been plagued by a slump lasting over two years.

Persistent job losses are particularly worrisome, and the small increase in the employment index still implies that firms have continued to lay off workers for 33 months now.

The ISM jobs gauge rose to 46.2 in June from 43.0 in May but was still below a level that denotes growth. New orders showed some life, edging up to 52.2 from 51.9, while the prices index rose to 56.5 from 51.5 in May.