Manufacturing Continued To Grow In May, But Slower

Economists continue to believe manufacturing will outperform the overall U.S. economy this year. But there's now additional evidence that the manufacturing sector's rate of growth is slowing.

The manufacturing activity index compiled by the Institute for Supply Management (ISM) fell nearly three percentage points from April's 57.3 to 54.4% in May, a greater decline than economists generally anticipated. The forecasters expected the index to dip to 56%. An index figure above 50% indicates the manufacturing sector of the economy is expanding a figure below 50% signals contraction.

Manufacturing new orders, production and employment grew more slowly in May, with new orders falling the most from April -- nearly four percentage points. Indeed, the new orders component of ISM's manufacturing activity index has slipped just over eight percentage points since February, "a significant loss of momentum," noted Norbert J. Ore, chair of ISM's manufacturing survey committee.

Prices that manufacturers pay for goods, particularly raw materials, continue to be a concern, he related. The price part of ISM's manufacturing activity index rose 5.5 percentage points in May, faster than in April. "Commodity prices are at record high levels and many are going on allocation," said one fabricated metals producer.

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