U.S wishful Manufacturing growth expanded at a slow pace in May

Manufacturing in U.S. Expanded at a Slower Pace in May

By Lorraine Woellert – Jun 1, 2012 3:32 PM GMT+0100

Manufacturing in the U.S. grew at a slower pace in May as factories tempered production and pared inventories in response to weakness in the global economy.

The Institute for Supply Management’s factory index fell to 53.5 after reaching a 10-month high of 54.8 in April, the Tempe, Arizona-based group reported today. Readings greater than 50 signal growth. The median projection of economists surveyed by Bloomberg News called for a decrease to 53.8 in May.

Manufacturing, which has been a bright spot since the economic expansion began three years ago, may be starting to cool. While gains in auto sales are underpinning factory growth, the industry may become strained by stagnation in Europe’s economy, U.S. fiscal concerns and less corporate investment.

“This signals continued moderate economic growth, not any sort of boom or bust,” Michael Brown, an economist at Wells Fargo & Co. in Charlotte, North Carolina, said before the report. ‘You have the uncertainty in Europe, uncertainty around U.S. fiscal policy and the federal budget for next year.”

Stocks held losses after the figures as an earlier report showed the weakest employment gains in a year. The Standard & Poor’s 500 Index (SPX) decreased 1.9 percent to 1,286.06 at 10:32 a.m. in New York. The yield on the benchmark 10-year note fell to 1.47 percent from 1.56 percent late yesterday.

Estimates of the 82 economists surveyed by Bloomberg News ranged from 51 to 55. The gauge averaged 55.2 in 2011 and 57.3 in the previous year.
Prices Paid

The figures showed an index of prices paid by manufacturers for raw materials shrank in May for the first time this year. The gauge dropped to 47.5 last month from 61.

Another report from the Labor Department today showed the smallest gain employment in a year. Payrolls rose 69,000 in May and the jobless rate unexpectedly climbed to 8.2 percent.

The ISM’s measure of production decreased to 55.6 from 61, while the index of export orders fell to 53.5 from 59. The inventory index decreased to a five-month low of 46 from 48.5 a month earlier.

The ISM’s orders gauge climbed to 60.1 last month, the highest since April 2011, from 58.2 in April. The employment gauge decreased, to 56.9 from 57.3 in the prior month.

The measure of orders waiting to be filled dropped to 47 from 49.5.

Around the world, manufacturing is struggling. China led a slowdown in manufacturing across Asia that adds risks for the global economy as Europe’s sovereign-debt crisis roils markets.
China Purchasers

The Purchasing Managers’ Index fell to 50.4 in May from 53.3 in April, China’s statistics bureau and logistics federation said in Beijing. A second gauge for China also declined, along with measures for India, South Korea and Taiwan.

A gauge of manufacturing in the 17-nation euro zone fell to a three-year low of 45.1 in May, indicating a 10th month of contraction, while unemployment reached 11 percent, the highest on record.

Another survey, from the Institute for Supply Management- Chicago, showed yesterday that business activity in the U.S. expanded in May at the slowest pace in more than two years as orders and production cooled.

Stronger auto production that bolstered the U.S. economy from January through March may keep bolstering manufacturing. Cars sold at the fastest pace in four years in the first quarter of the year, averaging a 14.5 million pace, according to data from Ward’s Automotive Group. In April, vehicle purchases ran at a 14.4 million rate.
Weaker Demand

At the same time, manufacturers are bracing for weaker demand from Europe, where an economic slump showed signs of deepening after Greece failed to form a government after May 6 elections and Spain struggles to clean up banks amid recession and unemployment exceeding 20 percent.

“Europe is certainly a question mark for us right now as the debt crisis continues to weigh on European markets,” Michael Lamach, president and chief executive officer at Ingersoll-Rand Plc (IR), in Swords, Ireland, said at a May 30 conference. “Certainly the outcome here is not yet known or clear to us.”

Leave a Reply