The major market indices eventually turned positive today, but began the day down after a major economic report this morning indicated continued weakness in the U.S. manufacturing sector.

The Institute of Supply Management (ISM) reported that its June Purchasing Managers Index (PMI) came in at 49.8%. This was up 0.4% from May, but below Wall Street's expectations for 51.0%. Anything below 50.0% indicates a decline in the manufacturing economy. At 49.8%, June marked the fourth straight month of contraction in U.S. manufacturing.

The closely watched PMI is based on data compiled from purchasing and supply executives in over 400 industrial companies. Though the overall PMI was negative, manufacturing executives did happen to note positive activity in the areas of New Orders and Production.

The New Orders Index grew for the second straight month in June with a reading of 52.2%, up 0.3 percentage points from May. Similarly, the Production Index also grew for a second consecutive month with a reading of 52.9%, up 1.4 percentage points from the prior month.

Another interesting data point was in the area of prices, which so far are showing no sign of deflation. The June Prices Index came in at 56.5%, marking the 16th consecutive month of higher prices. The June ISM survey found that 26% of supply executives paid higher prices and 13% paid lower prices, while 61% reported that prices were unchanged from May.

Finally, it should be noted that even while the manufacturing sector continues to show weakness, that doesn't equate to a lack of growth in the overall economy. The ISM has found that any sustained PMI above 42.9% will generally correspond to an expansion of the overall economy. If past correlations between the PMI and the overall economy can be trusted, then the average PMI so far this year (49.2%) would have us on course for 2.3% growth in real gross domestic product (GDP).

The bottom line? Manufacturing is weak, but getting a little better; and consequently, the economy is delivering modest growth. Even so, the weakness of this economic rebound leaves the economy vulnerable to future recessions.