U.S. manufacturing growth slowed sharply in May amid rising commodity prices and an uncertain economic outlook, according to the Institute for Supply Management’s monthly index.
The ISM factory index fell to 53.5 from 60.4 in April. It was the 22nd consecutive monthly reading above 50, which indicates expansion, but the drop put the widely watched gauge at its lowest level since September 2009.
By the Numbers: ISM U.S. Manufacturing Index vs. ISM U.S. Production Index.
Freight shipments have benefited from manufacturing expansion but have shown signs of slowing in recent weeks. The American Trucking Associations’ truck tonnage index slipped 0.7 percent in April.
Higher commodity prices contributed to slowing growth in the ISM index. Several index components showed steep declines – the index’s production component fell to 54.0 from 63.8 in April, exports to 55.0 from 62, and new orders to 51.0, the lowest since June 2009, from 61.7.
Cliff Waldman, economist at the Manufacturers Alliance/MAPI, said the ISM index suggested “a significant slowdown from what was likely an unsustainable pace.” He said the sharpness of the declines in the index’s gauges of new orders, production and backlogs was “worrisome.”
“Earlier in its recovery, manufacturing had the wind at its back from a very pronounced rebuilding of inventories and a quick rebound in the growth rate of key emerging market economies,” Waldman said.
“At this point, however, elevated commodity prices, slowing global growth and an increasingly questionable outlook for the U.S. economy are creating headwinds for the factory sector, which thus far has been the one strong element in an otherwise sluggish U.S. economic rebound.”