WASHINGTON, July 02 (Reuters): US manufacturing activity slowed to near a three-year low in June, with a measure of new orders received by factories tumbling, amid growing anxiety over an escalation in trade tensions between the United States and China.
Other data showed construction spending unexpectedly fell in May as investment in private construction projects dropped to its lowest level in nearly 2-1/2 years.
The reports were the latest indications that economic growth slowed in the second quarter after getting a temporary boost from exports and an accumulation of inventory.
While the slowdown in factory activity was not as steep as had been flagged by some regional factory surveys, a sharp drop in a gauge of prices paid by manufacturers could be yet another reason for the Federal Reserve to consider cutting interest rates this month.
The US central bank last month signaled it could ease monetary policy as early as this month, citing low inflation as well as growing risks to the economy from US-China trade tensions.
"Manufacturing is clearly taking it on the chin from the rising trade uncertainty," said Chris Rupkey, chief economist at MUFG in New York.
The Institute for Supply Management (ISM) said its index of national factory activity dropped to 51.7 last month, the lowest reading since October 2016, from 52.1 in May. It was the third straight monthly decline in the index.
A reading above 50 indicates expansion in the manufacturing sector, which accounts for about 12 per cent of the US economy.
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