Realism has returned to the American manufacturing sector as the optimism that followed the election of Donald Trump has faded but the pace of expansion remains the best in almost two years.
The purchasing managers index rose slightly in May to 54.9 from 54.8 the prior month, reported the Institute for Supply Management (ISM) on Thursday. Analysts had forecast a score of 54.5.
Reading above 50 in this long running series indicate expansion. Data begins in January 1948.
The index had climbed to a 33 month high of 57.7 in February from 52.0 in October on expectations that the tax and health care reform, regulatory and economic stimulus plans of the new administration would help to lift the U.S. economy above the 2.0-2.5 percent growth rate of the past eight years.
A positive factory outlook has been underpinned by the new orders index which jumped 2 to 59.5 in May. In February this gauge of incoming business had soared to 65.1, the second highest reading since the end of the recession in June 2009, eight years ago.
Orders are being supported by steady if not spectacular domestic demand and a global economy that looks considerably better than it did a few months ago. China in particular, seems to have stabilized her economy with the government’s own purchasing managers’ index registering expansion in May for the 10th month in row after contracting in eight of the prior 12 months.
The ISM gauge for employment increased to 53.5 in May from 52.0, surpassing the median prediction for a smaller gain to 52.8. This measure had popped to 58.9 in March, the best level in almost six years.
The initial optimism that followed the November 8th election has cooled as the political and legislative realities of Washington have delayed the administration’s agenda.
Export orders fell to 57.5 in May from 59.5. The production index slipped to 57.1 from 58.6. Factory and customer inventories were little changed and the backlog of orders at factories dropped to 55.0 from 57.0.
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