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Last Updated: Monday, 3 July 2006, 19:33 GMT 20:33 UK
Fall in US manufacturing growth
Ford plant in Illinois
Ford, GM and Chrysler are still losing ground to Japanese rivals
US manufacturing growth grew slower than expected in June, hit by high energy and raw material prices.

The Institute for Supply Management's manufacturing index for the last month dipped to 53.8 from May's 54.4.

Despite the fall, analysts welcomed the figures as suggesting the US economy was not over-heating.

They came as separate figures showed yet more woe for US carmakers. General Motors' sales fell 26% in June, while Chrysler dropped 15% and Ford 7%.

All have been hit by petrol prices remaining high and slower sales of trucks and sports utility vehicles, upon which they remain too reliant.

General Motors added that its latest drop in sales was expected and had been partly caused by its ongoing policy of offering fewer price reductions.

At the same time, Japan's Toyota saw its US sales shoot up 14% in June, as it continues to eclipse the American firms.

Toyota said it was continuing to benefit from its wider range of fuel-efficient cars, which are growing in popularity in a US more concerned about fuel prices.

Interest rate hopes

The latest figures from the Institute for Supply Management mark the 37th consecutive month that US manufacturing has expanded - any figure above 50 represents growth.

Yet analysts said the slight slowdown could help tempt the Federal Reserve not to further raise interest rates when its rate-setting Open Market Committee next meets in August.

Last week it raised rates for the 17th straight time by one quarter of a percentage point to 5.25%.

Separate data showed that US construction spending in May showed its biggest drop since September 2004, a further indication that the US housing market was cooling.


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