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U.S. NAPM Index: Manufacturing Industry Continues To Contract

By BridgeNews A key barometer of the health of the U.S. manufacturing economy fell in May, indicating that growth in the sector remains sluggish after a slight improvement the previous month. The National Assn. of Purchasing Management says its index of economic activity fell to 42.1 in May from 43.2 in April. The May level was slightly below 43.7 that economists had forecast. May marked the tenth month the main index stood below the 50.0 boom-or-bust level, showing that the manufacturing sector continues to contract. A reading above 50 indicates the manufacturing economy is generally expanding and a reading below 50 signals it is generally contracting. In addition, NAPM says that a reading below 42.7, over a period of time, indicates that the economy is contracting in general. The NAPM says the manufacturing sector's employment component fell to 35.0 from 38.1 in April, while the inventory index fell to 38.7 from 39.6 in April. This level is well below what the NAPM considers as indicating growth in manufacturing employment. Indeed, the May employment report released June 1 showed manufacturing employment plunged 124,000 last month. The NAPM says the manufacturing index's price component, which measures how much producers pay for materials, fell to 45.2 in May from 48.9 in April. Meanwhile, new orders and production stood at 45.5 and 42.7, respectively. In April the new orders index was at 45.9, while the production index was at 42.9. The imports index was at 46.6 in May, down from 47.2 in April, while exports were at 45.6, compared with 47.3 the previous month. In the release, NAPM noted that the manufacturing sector continued to decelerate in May as seen at the start of the second quarter in April. But "it is encouraging that pricing pressures appear to be moderating and inventory liquidation has accelerated relieving concerns about inflationary pressures," it also said.

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