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U.S. Manufacturing Likely Improved In June

Solid job growth has flowed into spending on cars and trucks, which should bolster manufacturing.

Economists forecast that the manufacturing index from the trade group of purchasing managers inched up to 53.2 from 52.8 in May, according to a survey by FactSet. That would be the highest level since January. Any reading above 50 signals growth. Two straight months of activity increasing would signal that U.S. factories are beginning to adapt and overcome the drags caused by a rise in the dollar's value and cheaper oil prices, two trends that date back to last fall.

Falling oil prices forced energy companies to curtail orders for new equipment and pipelines as their margins were squeezed and rigs were shut down. The stronger dollar made U.S. goods more expensive overseas, which weighed on sales.

Those two trends seem to have tailed off.

Oil has stabilized at around $60 a barrel. It had plunged as low as $50 a barrel at the start of the year from roughly $110 in June 2014. The decrease caused a decline in oil refining in May that weighed on factory output, according to the Federal Reserve.

The dollar, too, has steadied in recent months. While U.S. currency will continue to be a drag on exports, manufacturers say they can at least adjust production schedules to account for it.

This leaves manufacturers dependent on greater demand domestically from consumers. Solid job growth over the past year has flowed into spending on cars and trucks, which should bolster manufacturing. Auto sales rose 2 percent in May compared to the prior year, as people bought 1.64 million cars and trucks, the highest total since July 2005, according to Autodata Corp.

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