Manufacturing sector sees continued growth

Don Hogsett, June 17, 2002

Economic activity in the key manufacturing sector grew for a fourth straight month in May, the nation's purchasing managers reported, setting the stage for continued momentum in the second half of the year.

In particularly good news, the textiles sector was highlighted in the monthly gauge of manufacturing activity, making gains in several key metrics, notably new orders, production, employment, order backlogs and export orders.

Pointing to a continuing recovery in the manufacturing sector, a crucial driver of the American economy, the Institute for Supply Management (formerly the National Association of Purchasing Managers) said its closely watched monthly gauge of manufacturing activity climbed to a level of 55.7 percent, up from a level of 53.9 percent in April.

"May was a good month for manufacturing," said Norbert Ore, chairman of the Institute for Supply Management's Manufacturing Business Survey Committee. The Purchasing Managers' Index strengthened as 16 industries saw improvement in new orders. This should help establish momentum in the sector that will carry forward into the third quarter."

Ore added, "The growth in manufacturing activity continued and even gained some momentum during May," but some sectors experienced a faster recovery than others.

While most of the indicators were pointing upward and signaling a continuing recovery during May, manufacturing employment remains weak, though improving slightly. The Purchasing Managers Employment Index remained beneath the break-even level of 50 percent, coming in at 47.3 percent in May, up a slender 0.6 percent.

The rate of inventory liquidation continued to slow in May, as the Inventories Index came in at a level of 45.6 percent, up from 42.9 percent the prior month. While most sectors reported lower inventories, textiles was one of four industries, along with primary metals, chemicals and fabricated metals, where stockpiles climbed higher during May.

Pointing to continued uncertainty and caution among customers about the strength and pace of the economic recovery, purchasing managers reported for a 12th straight month that their customers do not have sufficient inventories on hand. The Customers' Inventories Index fell to a reading of 39.0 percent, down from 40.5 percent the prior month. There were no reports of excessive customers' inventories in May.

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