Economists expect a measure of manufacturing activity to show the sector declined in June at the slowest pace since last August.
Analysts polled by Thomson Reuters expect the index from the Institute for Supply Management, a trade group of purchasing executives, will read 44.5 in June compared with 42.8 in May. A reading below 50 indicates contraction.
If accurate, it would be the 17th consecutive month of deterioration in manufacturing. The pace of decline has been slowing, however, since the index hit a 28-year low of 32.9 in December.
An ISM manufacturing reading above 41.2, over a period of time, tends to indicate expansion in the overall economy, according to the ISM. A level above 50 indicates that the manufacturing sector itself is growing. ISM hasn't had a growth reading in manufacturing since January 2008.
The manufacturing index, which includes new orders, production, employment, inventories, prices, and export and import orders, is scheduled for release at 10 a.m. EDT Wednesday. It is based on a survey of the Tempe, Ariz.-based group's members.
In May, new orders grew for the first time since November 2007. Meanwhile, respondents said their customers' inventories shrank for the second straight month, which should help spark demand for manufacturers' goods.
Growth in new business orders is a prerequisite for increased production and eventually hiring.
Citigroup economists expect U.S. industrial production to have bottomed in the second quarter, and to start growing again by the middle of next year.
But analysts caution that new manufacturing jobs may be slow to come as consumer spending remains weak and other countries struggle with their own recessions. The most recent government data said U.S. exports of goods dropped 14.2 percent in the first quarter to $249.4 billion. American companies have seen foreign sales of chemicals, metals, autos and auto parts, and capital goods fall.
One positive for businesses this year — falling prices — may be set to end. Capital Economics advised investors to expect a sharp increase in the index tracking prices businesses pay, which in May stood at 43.5 from 32 in April. Since then, prices of crude oil and other commodities have surged.
Manufacturing snapshots from regional Federal Reserve banks in the past few weeks have been mixed. In New York, conditions for manufacturers deteriorated faster in June than in May, but expectations for the future rose. A big drop in auto production hurt Midwest manufacturing, said the Chicago Federal Reserve Bank. But the Dallas Fed said the decline in Texas factory activity moderated in June, and the Federal Reserve Bank of Richmond noted growth in factory shipments and new orders throughout the central Atlantic region.
Manufacturers are still cutting jobs, though the pace of layoffs has slowed.
Farm machinery company Deere & Co. said Tuesday that 800 salaried employees, or 3 percent of its salaried work force, took a voluntary buyout offer. That's four times as many as the company expected when it announced the program in April.
Household-products maker Kimberly-Clark Corp. said last month it expects to cut 1,600 jobs, or 3 percent of its global work force, amid dropping profits.
