ISM Manufacturing Index Below Estimates

U.S. manufacturing growth slowed in April to its lowest level in nearly two years, the Institute for Supply Management (ISM) reported on May 2. The Tempe, Ariz.-based group's manufacturing activity index was 53.3% last month, 1.9 percentage points below its March level of 55.2%. Economists generally expected a figure of 55% in April.

A figure above 50% indicates that the manufacturing sector of the U.S. economy generally is growing; a figure below 50% signals the sector is contracting.

New orders for manufacturers continued to grow in April, although at a slower rate, falling 3.4 percentage points to 53.7% last month from 57.1% in March. Employment growth slowed during April, slipping one percentage point to 52.3% from 53.3%. Manufacturers' inventories, which had been growing, started to contract in April.

"The trend is definitely toward a slower pace of growth, and that should relieve some of the pricing pressure that the sector has experienced during 2004 and year-to-date in 2005," says Norbert J. Ore, chair of ISM's manufacturing business survey committee. "Declines in inventories indicate that manufacturers are adjusting to slower growth in new orders."

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