U.S. Manufacturing Fails to Grow in May

Factory output did increase slightly from last month

Economic activity in the manufacturing sector failed to grow in May, while the overall economy grew for the 79th consecutive month, according to the Manufacturing ISM Report On Business released on June 2. The Institute for Supply Managment's PMI index registered 49.6%, 1 percentage point higher than the 48.6% reported in April.

A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

Commenting on the report, Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI said, "There was some positive momentum from working off the backlog of orders and strengthening exports .In fact, the ISM production indicator suggests that factory output actually increased slightly in the last month. The substantial decline in the value of the dollar is acting as a counterweight to the depressed situation in the United States housing, motor vehicle and consumer product markets. An unfortunate consequence of the falling dollar and concurrent strong growth in developing countries, though, is that commodity prices are skyrocketing. It is increasingly difficult to pass on commodity cost increases in a generally weak U.S. economy, and this dynamic will lead to shrinking profit margins.

ISM's New Orders Index registered 49.7% in May, 3.2 percentage points higher than the 46.5 percentage points registered in April.

The Production Index increased to 51.2% in May, an increase of 2.1 percentage points from the 49.1% reported in April.

And the Employment Index registered 45.5% in May, which is an increase of 0.1 percentage point when compared to the 45.4% reported in April.

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