US manufacturing expanded at slower pace in May

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Associated Press

Posted on June 2, 2014 at 8:02 AM

Updated Monday, Jun 2 at 8:06 AM

WASHINGTON (AP) — U.S. manufacturers grew at a slower pace in May as measures of orders and production fell. Factories also added jobs at a slower pace.

The Institute for Supply Management said Monday its manufacturing index fell to 53.2 last month from 54.9 in April. That's the lowest level since February. Any reading above 50 indicates expansion.

The retreat in the ISM's index is the latest sign that manufacturing activity is growing at only a modest pace.

A measure of prices paid by manufacturers jumped, a sign that factories are paying more for raw materials. If companies pass on those costs, that could lift inflation in the coming months.

The survey follows other recent manufacturing indicators that have painted a mixed picture.

Factory output fell in April as manufacturers produced less furniture, machinery and plastics, according to a Federal Reserve report in mid-May. The drop followed two months of strong gains and economists said it was likely temporary.

U.S. factories received more orders for long-lasting goods in April, the Commerce Department said last week. But the increase occurred because of a surge in demand for military aircraft. Excluding defense-related goods, orders actually fell.

And orders for core capital goods, a category viewed as a proxy for business investment plans, fell 1.2 percent in April. It was the weakest showing since a 1.9 percent January drop.

Still, Americans are purchasing cars at a healthy pace and most economists expect businesses to spend more on machinery and other equipment in the coming months. Companies cut back on such spending in the first three months of the year, setting the stage for a possible rebound.

Last year, U.S. factories were cranking out appliances, autos and other goods at a healthy pace until harsh winter weather descended. The ISM's index rose for six straight months until dipping slightly in December. That was followed by January's sharp fall.

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