By Chris Cermak
WASHINGTON (MNI) All signs point to a slowdown in U.S.
manufacturing ahead of the Institute for Supply Management’s Wednesday
release of its May survey, leaving businesses wondering whether the
pullback is temporary or points to a more serious weakening of the U.S.
economy.
The May ISM purchasing managers index is forecast to drop to 57.5
in May from 60.4 a month earlier according to a survey of economists by
Market News International.
It would mark the first time this year that the closely-watched
manufacturing index has fallen below 60, though it is still well above
the 50 mark that indicates growth in the sector.
HSBC economist Ryan Wang said U.S. exports, which fueled a rebound
in manufacturing earlier this year, are now a key reason for the slower
pace of growth in May.
“The slowdown seems to be global. That’s impacting the U.S.,” Wang
said in an interview. “The key question is whether it turns into a more
serious pullback.”
Regional manufacturing indicators across the board have signaled a
slowdown is on the cards. The Philadelphia Fed’s manufacturing index
plunged to 3.9 in May from 18.5 the previous month.
The New York Fed’s Empire State report and Chicago PMI have also
shown slower growth in their regions, while the Dallas Federal Reserve
and Richmond Fed indexes reported contractions in May.
The weakening in the manufacturing sector has followed a broader
weakening in growth across the U.S. economy, where a stubborn
first-quarter GDP reading of 1.8% has left many economists revising
downward their predictions for output in the coming months.
Yet job growth in manufacturing has not slowed as significantly,
also mirroring a trend in the wider economy.
The manufacturing sector added 29,000 jobs in April, as the wider
economy added 244,000. The employment indicators of regional
manufacturing indices have also typically shown less of a slowdown than
the overall indicators for the sector.
Wang said many businesses appeared to be “hitting the pause button,
certainly in production,” hoping to avoid a build-up of excess
inventories as they wait to see whether demand will firm up in the
coming months.
The May ISM Manufacturing Survey will be released at 10 a.m. ET
Wednesday.
–Chris Cermak is a reporter for Need to Know News
** Market News International Washington Bureau: 202-371-2121 **
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