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Report: Manufacturing Sector Expands But Some Signs of a Slow-Down

The latest Institute for Supply Management (ISM) manufacturing index hit 54.9 in May, versus consensus estimates of around 54.5, continuing a long stretch of expansion in the key sector. The measure showed manufacturing activity increased for the 96th straight month overall. Any reading above 50 demonstrates likely growth.

The index was up slightly from the 54.8 mark reported for April as 15 of the 18 manufacturing industries included in the survey grew in May. Segments like furniture, plastics and rubber products, machinery, food and beverage, and tobacco products all saw gains.

Meanwhile, other measures brought varying results. The production index, for example, decreased to 57.1 from 58.6. ISM’s prices index fell to 60.5 from 68.5 in April, and order backlogs dropped to 55 from 57. The employment index, though, strengthened to 53.5 from 52. The new orders index grew to 59.5, an increase of 2 percentage points from the April reading.

Separate data from firm Markit sounded in tune with some of the down notes in ISM’s finding. For instance, Markit’s final May purchasing manager’s index slipped to 52.7, an eight-month low. Although new order levels increased in May, the rate of expansion was the least marked recorded since September 2016.

“Manufacturing growth momentum continued to ebb in May, down to its weakest since just before the presidential election,” said Chris Williamson, the chief business economist at IHS Markit. “Manufacturing output, order books and employment all grew at only modest rates as sluggish sales prompted firms to scale back hiring. Exports sales remained especially lackluster, hampered in part by the relatively strong dollar. The survey also brought signs of companies becoming more cautious about holding inventory.”