Update: June NAPM Index Slows to 51.8

Updated from 11:14 a.m. EDT

Activity in the manufacturing sector continued to grow in June, although at the slowest rate since January 1999, according to the monthly survey by the National Association of Purchasing Management.

The NAPM said its broad index of activity in U.S factories fell to 51.8, compared to 53.2 in May. Any reading above 50 means business is growing for manufacturers; the decline in June denotes slower growth in factory activity.

The other indicators released by the NAPM, such as measures of prices, employment and new orders, also reflected slower growth in the nation's factories. The numbers fell below a survey by Bloomberg News, which predicted an index of 53.

"The manufacturing sector is clearly becoming a pocket of softness," said Anthony Karydakis, senior financial economist at BancOne Capital Markets, who was expecting an increase in the growth rate of factory activity, in the 53.5 to 54 range. "It is clearly consistent with a picture of a slowing economy."

Karydakis said the financial markets are unlikely to take cues from this data and conclude that the Federal Reserve is finished tightening interest rates. Instead, Wall Street will be much more focused on Friday's employment report for an indication of whether further rate increases are likely, he said. The Federal Reserve left its target federal funds rate unchanged at its last meeting June 28, although it said it was still worried about inflation.

The new data appeared to have little impact on the markets, as the Dow Jones Industrial Average was 8.84 points, at 10,456.73 Monday morning.

The Federal Open Market Committee, which sets interest rate policy, has raised rates by a total of 1.75 percentage points in six increments over the last year, in an effort to slow the economy.

The NAPM compiles its data from surveys of purchasing managers at more than over 350 industrial companies.

Separately, the Commerce Department said that construction spending in May was essentially flat at $809.3 billion, compared to $808.2 billion in April. The May figure was 7% higher than a year ago.