WASHINGTON (AP) -- U.S. manufacturing activity likely expanded in June after contracting for the first time in six months in May. More business spending and resilient consumer demand could reinvigorate factory output this year.
Economists forecast that the Institute for Supply Management's manufacturing index rose to 50.5 in June from 49 in May, according to FactSet. Readings above 50 indicate expansion.
The ISM, a trade group of purchasing managers, will release the report at 10 a.m. EDT Monday.
The index fell in May for the third straight month to its lowest level in nearly four years. New orders, production and order backlogs all shrank.
Manufacturing has slowed this year after providing crucial support to the economy for the first three years after recession ended in June 2009. Europe's slump has weighed heavily on U.S. exports. And businesses cut back on their investment in machinery and equipment in the first quarter.
That's caused factories cut jobs for the past three months.
Regional manufacturing reports have painted a mixed picture for June. Surveys by the Federal Reserve Banks of New York and Philadelphia both showed that factory activity jumped in those regions.
But a Chicago purchasing managers' index fell sharply in June, offsetting most of its big gain in May.
Still, there have been positive signs for manufacturing recently. U.S. businesses stepped up their orders for factory goods in April and May. And a category of orders that's viewed as a proxy for business investment plans — which excludes the volatile areas of transportation and defense — rose 1.1 percent in May, the third straight gain.
Consumers also spent more in May, including on autos, which should keep auto factories humming. Sales at auto dealers rose in May by the most in six months, according to the Commerce Department.
There are also signs Europe's economy is slowly recovering. A survey of German manufacturers has picked up in recent months, according to Capital Economics.
The U.S. economy expanded at only a 1.8 percent annual rate in the first three months of the year, the Commerce Department said this week, much slower than its previous estimate of 2.4 percent. The main reason for the lower figure was a sharp reduction in consumer spending on services. Spending on big-ticket factory goods, such as cars and appliances, remained healthy.
Still, economists forecast growth remained tepid in the April-June quarter, with most estimates between 1.5 percent and 2 percent.