For the first time since mid-2009, the ISM manufacturing index came in below 50, signaling contraction in the factory sector. However, it’s important to keep in mind that when financial strains, such as recent news out of Europe, push down consumer confidence, that also often pushes down the ISM index as well. In other words, today’s below-50 ISM index does not signal a recession and probably underestimates actual business activity in the factory sector. Notably, the employment index fell only slightly, to a still-robust 56.6. For the time being, though, today’s ISM report is consistent with a forecast that real GDP grew at a soft 1.5 percent annual rate in the second quarter. In other news this morning, the Census Bureau reported that construction spending increased 0.9 percent in May, easily beating the consensus expected gain of 0.2 percent. The gains in May were led by housing, which was up 3 percent. Commercial construction was up 0.4 percent, led by manufacturing facilities. Government projects fell, largely due to less school construction.