Manufacturing Growth Slows

Don Hogsett, Courtney Mueller, June 13, 2005

While still growing modestly, the U.S. manufacturing sector, a principal driver of the American economy, continued to lose momentum during May, the rate of growth slowing steadily over the past seven months, the nation's purchasing managers reported.

In a monthly gauge of activity in the sector, the Institute for Supply Management (ISM) said manufacturing continues to grow, but at a subdued pace, and its monthly barometer stood at 51.4, down from 53.3 in April, a seventh-straight month of cooling. The index is now down 9.8 points from a reading of 61.2 last June.

At 51.4, the gauge hovers just above the crucial mark of 50, the dividing line between growth and contraction.

“The manufacturing sector grew for the twenty-fourth consecutive month in May, the longest period of growth in the past 16 years,” said Robert Ore, chairman of the ISM's Manufacturing Business Survey Committee. But at the same time, he said, “The sector is losing momentum,” and this month's reading of manufacturing activity “is at the lowest level since June 2003.”

“The rate of growth in new orders continues to decline, and this month only 11 of 20 industries are reporting improvement when comparing May to April. The employment index failed to grow, ending 18 months of employment growth. The manufacturing sector is definitely slowing, and the question is whether a somewhat stronger dollar and the burden of high energy costs are slowly bringing this manufacturing growth cycle to an end,” he said.

May snapshot
Manufacturing benchmarks
Month-over-month percentage-point change

Source: Institute for Supply Management
Purchasing Managers' Index -1.9%
New Orders -2.0
Production -1.8
Employment -3.5
Inventories -0.1
Customers' Inventories +6.0
Prices Manufacturers Pay -13.0
Order Backlogs -2.0
Export Orders -2.3
Imports -2.8

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