It seems as though the hits keep coming, to coin a phrase once popular in the music industry. Thus, on a day that earlier had seen a weak employment report for May, a rising rate of unemployment in this country, listless gains in personal income and consumer spending for April, and distressing trends in manufacturing activity in both China and the euro zone, we now have received yet one more disquieting metric, with the issuance of data on U.S. manufacturing activity during May.
It is not that activity declined in this key sector. In fact, manufacturing has now risen for 34 consecutive months, following news from the Institute for Supply Management that demand picked up again last month. However, the rate of improvement, while remaining above the 50.0 level separating a declining industrial sector from one that is gaining, was too low, at 53.5, to engender confidence among economists and investors.
All told, manufacturing growth slowed last month, easing from April's estimated level of 54.8 to the aforementioned 53.5. True, this level did top the comparative figures issued in February (52.4) and March (53.4), but activity remains in the same area (53.1) that it has held, on average, for the past year. By this time, three years into an economic recovery, the industrial arena should be stronger. This persisting sluggishness, which is matched in the employment and housing sector, does not give us much hope that GDP growth will rise by more than 2% in the current year. Indeed, it is looking less and less likely that the current quarter's growth will exceed the downwardly revised 1.9% rate of gain inked in the opening period.
All told, as far as the survey's individual components are concerned, we saw further improvement in new orders, with that metric rising from 58.2 to 60.1; however, we saw slowing growth last month in production and employment, while deliveries, prices, and backlogs all fell back below 50.0.
As for comments from the nation's purchasing managers, it was noted that chemicals managers had observed just moderate improvement, while better demand and sales were noticed in the machinery sector. However, the purchasing managers reported weaker-than-expected results in computer and electronics demand.
In summation, this was not a very uplifting report, and while the result was in line with expectations, which also had been at 53.5, it is not a metric that will give many Americans confidence going forward.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.