Services Advance, Factory Productivity Is Lowered

By John S. McClenahen Unlike the manufacturing sector of the U.S. economy, which last month appeared still to be contracting, the non-manufacturing sector in May expanded for the second consecutive month. The non-manufacturing business activity index compiled by the Institute for Supply Management, Tempe, Ariz., reached 54.5% last month, up 3.8 percentage points from April's 50.7% mark and the index's best showing since its 54.5% in January of this year. New orders, inventories, order backlogs and imports all increased during May. "However, export orders fell below the 50[%] mark again, suggesting that a weaker [U.S.] dollar has yet to propel an export boom," says Maury Harris, chief U.S. economist at UBS Warburg, New York. For the overall index, a mark above 50% indicates that the non-manufacturing sector generally is expanding; a figure below 50% signals that it is contracting. Meanwhile, the U.S. Labor Department has released revised U.S. productivity data for the first quarter of this year. Both the 2.5% annual rate of productivity increase for the business sector and the 1.9% rate if increase for the nonfarm business sector were a bit higher than preliminary numbers released a month ago. However, the revised 1.9% annual rate of productivity increase for manufacturing was two-tenths of a percentage point below the 2.1% initially reported. The new number reflects "a downward revision in productivity growth in durable goods manufacturing, which comprises about 60% of employment in the sector," the Labor Department explained.

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