U.S. manufacturing sector contracted again in May

Monthly ISM report says manufacturers are caught between rising costs and weakening demand

Staff -- Logistics Management, 6/5/2008

Economic activity in the manufacturing sector failed to grow in May, according to a report released by the Institute for Supply Management (ISM). This is the fourth consecutive month of contraction for U.S. manufacturing.

The ISM’s manufacturing index—known as the PMI—registered 49.6% last month. A reading above 50% indicates the manufacturing economy is generally expanding; below 50% indicates it is contracting.

“Manufacturers find themselves caught between rising costs and weakening demand in many industries,” says Norbert Ore, chair of the ISM Manufacturing Business Survey Committee. “Exports continue strong due to the weak dollar—without the weak dollar, the story would be much more negative in manufacturing.”

New export orders grew for the 66th consecutive month in May. ISM’s New Export Orders Index registered 59.5% in May, an increase of 2 percentage points when compared to April’s index of 57.5%.

The Associated Press reported last week, however, that some analysts are predicting slower future demand for U.S. exports as Europe, Japan and other parts of the world experience economic slowdowns.

The one bright spot in today’s ISM report is the Production Index. The index moved above 50% after declining for two months.