WASHINGTON (MarketWatch) -- The manufacturing sector, which has been the strength of the U.S. economy, is slowing down, according to three separate reports released by the Federal Reserve on Thursday.
The timeliest data show further weakening in July after manufacturing output fell in June for the first time in a year. "Economic growth continues to soften into the third quarter," wrote Neil Dutta, an economist for Bank of America's Merrill Lynch.
U.S. stock markets were down about 0.8% after the Philadelphia Federal Reserve Bank said the Philly Fed manufacturing sentiment survey declined to 5.1 in July from 8 in June and 21.4 in May. The reading is above zero, which shows the sector is still expanding, but the breadth of that expansion has diminished.
Economists surveyed by MarketWatch were expecting a small gain in the Philly Fed to 10 in July. See our complete economic calendar.
The Empire state index from the New York Fed also fell to 5.1 in July from 19.6 in June, compared with expectations of a drop to 19.
"Today's U.S. reports revealed a remarkably weak round of July sentiment readings from both the New York and Philly Fed surveys that trumped the surprisingly firm round of industrial production figures for June, to leave a market focused on the slowing in the U.S. factory sector as we pass the mid-year mark," wrote analysts for Action Economics.
The details of the Philly Fed report were "particularly negative," wrote Steven Wieting, an economist for Citigroup Global Markets. The new-orders index fell to negative 4.3 from 9, its first negative reading in 12 months. The shipments index slowed to 4 from 14.2.
