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Manufacturing weakest since 2003 { June 1 2005 } Original Source Link: (May no longer be active)
http://www.nytimes.com/2005/06/01/business/01cnd-econ.html?http://www.nytimes.com/2005/06/01/business/01cnd-econ.html?
June 1, 2005
Pace of Manufacturing in May Is Weakest Since June 2003
By JENNIFER BAYOT
Activity at the nation's manufacturers slowed in May to the weakest pace in almost two years, an industry group reported today, as new orders lagged and prices fell.
The Institute for Supply Management said that manufacturing, which accounts for about 13 percent of gross domestic product, grew for the 24th month in a row. But the expansion was the most modest since June 2003.
"While this represents the longest period of growth in the last 16 years, the data also indicates that the sector is losing momentum," Norbert J. Ore, chairman of the institute's survey committee, said in a statement.
Overall, manufacturing activity fell to a reading of 51.4, from 53.3 in April. The institute's indexes gauges rates of change, and values over 50 represent expansion.
The institute said its measure of job creation failed to expand for the first time in 18 months, instead contracting to 48.8 from 52.3 in April. Manufacturers employ close to 11 percent of the country's workers - about 14.3 million people as of April.
"There are worries, concerns, that the manufacturing sector of the economy is very close to contracting," said Hugh Johnson, chief investment officer of Johnson Illington Advisors, based in Albany.
An important measure of inflation, the index of prices manufacturers paid for materials, dropped sharply, to 58.0 from 71.0, making it less likely that business and consumers would pay higher prices down the line.
"I think it's going to give the Federal Reserve a reason to think long and hard about raising interest rates at their June 30th meeting," Mr. Johnson said.
But Drew T. Matus, a senior economist at Lehman Brothers, said the price drop "is probably going to be short lived" because gas prices have risen since the survey was taken.
Analysts said the market may have also been responding to televised comments by Richard Fisher, president of the Federal Reserve Bank of Dallas, that the Fed's rate increases were in the "eighth inning," or close to ending.
In addition, two reports showed that homebuilding and homebuying remained strong. The Office of Federal Housing Enterprise Oversight, which regulates the mortgage giants Fannie Mae and Freddie Mac, said that home prices rose 12.9 percent in the first quarter, compared with the first quarter of last year.
The Commerce Department reported that spending on construction grew 0.5 percent in April, the 15th gain in a row. The building of private homes and businesses led the increase, reflecting optimism about the economy and job growth, economists said.
Copyright 2005 The New York Times Company
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