The larger-than-expected drop in the July National Assn. of Purchasing Management (NAPM) index to 53.4 reflects a continued moderation in the manufacturing sector, analysts said. "The NAPM is now coming into balance with the other surveys, which indicate the factory sector is going to have moderate growth, not robust growth," notes Stan Shipley, senior economist at Merrill Lynch. The NAPM index is updated monthly based on a survey of NAPM members. An index above 50 indicates expansion in the U.S. manufacturing sector; a reading below 50 indicates contraction. Consensus forecasts called for the July NAPM to edge down to 56.0 from 57.0. The larger-than-expected slide in the overall NAPM is consistent with other data, such as industrial production and durable goods orders, and show the manufacturing sector "continues to improve, but the rate of improvement seems to be ebbing," says Susan Hering, an economist at Carr Futures. Lynn Reaser, chief economist with the Bank of America Private Client Group, said the July index shows the nondurable side of the economy is suffering from import competition, and the manufacturing sector is not about to break out in a major rebound. "The retooling of auto plants may have dampened the index to some extent in July with a ripple effect from the auto sector -- particularly since technology and the auto sector have been the key drivers behind the upturn in manufacturing," Reaser says.