American manufacturing is still expanding

Two major reports on US manufacturing in May showed the sector continued to expand.

The Institute of Supply Management’s manufacturing index was 51.3, beating the expectation for a slump to 50.3.

This showed that the sector expanded in May for a third straight month, even after forecasts for a contraction following several weak regional surveys.

Most regional manufacturing surveys missed expectations in May, suggesting that the sector was still reeling from its recent slowdown triggered by weak demand and a strong dollar.

According to ISM, new orders and production continued to rise, but at a slower pace. Manufacturing employment shrank again at an unchanged pace, while the drop in inventories picked up speed.

In a separate report, which painted a different picture, Markit’s final manufacturing purchasing manager’s index (PMI) for May was 50.7.

It slowed a bit from 50.8 in April due to lower production, and had been expected at 50.5.

Underneath the headline beat, the details of the report showed that output fell for the first time since September 2009. New orders rose at the slowest pace since last December, as client demand stayed low.

“Payroll numbers are under pressure as factories worry about slower order book growth, in part linked to falling export demand but also as a result of growing uncertainty surrounding the presidential election,” said Markit chief economist Chris Williamson.

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