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In an indicator that the factory sector continues to hold up despite the housing slump, manufacturing growth in June unexpectedly reached its fastest pace in over a year, according to the Institute for Supply Management's manufacturing index. SPY 03 July 2007The rise was attributable to production increases and new orders. The June index figure was 56.0 versus 55.0 in May, beating economists' forecasts of no change. A figure over 50 is considered an indicator of growth in the sector. The result appears to confirm the belief of some analysts that broader economic growth is picking up speed after grinding to a near-halt in Q1. "The softness we saw in the first quarter of this year was concentrated in the manufacturing sector," said Daiwa economist Michael Moran, "but this measure tells us activity has bounced back." In an encouraging inflation note, the ISM's prices paid index dropped to 68.0 from 71.0, but employment moved down to 51.1 from 51.9.

Sources: MarketWatch, Wall Street Journal, Bloomberg I, II, Reuters I, II [video]
Commentary: Economic Report Summary: Manufacturing Rebound, Steep Losses in Retail JobsISM Index Rise [in April] Means Current Rally Can ContinueManufacturing Bounces Back [in April]; Pending Home Sales Decline
Stocks/ETFs to watch: S&P 500 Index (NYSEARCA:SPY), Diamonds Trust Series 1 ETF (NYSEARCA:DIA), iShares Lehman Aggregate Bond (NYSEARCA:AGG)

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Source: ISM Index: Factory Sector Posts Strong June