U.S. manufacturing growth slowed

Manufacturing activity in the world's largest economy slowed last month, indicating the industry will contribute less to U.S. growth this quarter. A measure of manufacturing activity fell to 50.7 from the prior month's 51.3, and moved closer to the 50 level, which is the dividing line between expansion and contraction, the Institute for Supply Management said Wednesday. In the meantime, the forward-looking new orders component inched higher to 52.3 from 51.4, while production rose to 53.5 from 52.2. 

"Manufacturing is stalling a bit," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York, who was the best forecaster of ISM manufacturing over the past two years, according to data compiled by Bloomberg. "Part of it is an inventory correction and part of it is the impact from fiscal tightening. The second quarter is looking pretty sluggish."

Also Wednesday, a survey conducted by Bloomberg showed that the Fed is likely to reduce its monthly purchases in the last quarter of this year to $50 billion from $85 billion. The Federal Reserve led by Ben Bernanke should find a way to slow down the pace of monthly purchases enough to signal the stable improvement in the economy without prompting a rise in interest rates.