NEW YORK, July 2 (Reuters) - The U.S. manufacturing sector unexpectedly contracted in June for the first time in nearly three years as new orders tumbled, according to an industry report released on Monday.
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, and below even the lowest forecast of 50.5.
It was the first time since July 2009 that the index has fallen below the 50 mark that indicates contraction.
"The implication here is a very soft second half of the year," said Jacob Oubina, senior U.S. economist at RBC Capital Markets in New York.
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 their lowest level since April 2009 with the index at 47.8 compared with 60.1, while the employment gauge slipped to 56.6 from 56.9.
U.S. stocks turned lower immediately after the data, while Treasury bonds extended price gains and the dollar fell further against the yen.