The US manufacturing sector unexpectedly contracted in June for the first time since July 2009 as new orders tumbled, according to an industry report released today.

The Institute for Supply Management said its index of national factory activity fell to 49.7 from 53.5 the month before, missing expectations of 52.0, according to a Reuters poll of economists.

A reading below 50 indicates contraction in the manufacturing sector.

"The implication here is a very soft second half of the year," said Jacob Oubina, senior US economist at RBC Capital Markets in New York.

Mr Oubina said with growth slowing, there is a good chance the Federal Reserve could undertake another round of bond buying to prop up the economy at its next meeting.

New orders dropped to 47.8 from 60.1, while the employment gauge slipped to 56.6 from 56.9.

Reuters