US manufacturing in contraction for 4th month

02 June 2008 17:23  [Source: ICIS news]

WASHINGTON (ICIS news)--US manufacturing industries largely remained in contraction for the fourth month in May although signs of possible improvement were apparent, including growth in the chemicals sector, a key report indicated on Monday.

 

The Institute of Supply Management (ISM) said its closely watched purchasing managers index (PMI) for the broad US manufacturing sector was at 49.6% in May, indicating that industrial production again failed to show growth.

 

An index reading below 50% means that the manufacturing sector is in contraction while a reading above that midpoint indicates production growth.

 

While the PMI for May remained just below the 50% midpoint, the month’s 49.6% measure was a slight improvement from April’s measure of 48.6% and suggested that the sector may be clawing back to positive growth.

 

However, much of the improvement in the manufacturing sector was attributed to export trade rather than domestic sales. The ISM export index for May was 59.5%, indicating solid export growth, and was up significantly from April’s export index reading of 57.5%.

 

Even though exports remain strong, the institute said that bright spot also has a dark side.

 

“Exports continue strong due to the weak dollar and without the weak dollar the story would be much more negative in manufacturing,” said Norbert Ore, chairman of the institute’s survey committee.

 

“Manufacturers find themselves caught between rising costs and weakening demand in many industries,” Ore added.

 

Among the 19 manufacturing segments that the institute tracks for its monthly PMI survey, the chemicals sector was among seven that experienced growth in May.  Other growth sectors included computers, primary metals, paper products, fabricated metal products and miscellaneous manufacturing - all downstream consumers of chemicals.

 

However, plastics and rubber products were among manufacturing sectors that reported contraction in May, joined by transportation equipment, appliances, wood products, printing and furniture, among others.

 

The institute quoted one survey respondent in the chemicals sector as saying that “Pricing is skyrocketing for chemicals”. A manager in the food and beverages sector complained that “Ethanol-driven agricultural commodity increases continue to pose major hurdles”.

 

($1 = €.65)

 

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By: Joe Kamalick
+1 713 525 2653

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