Manufacturing sector gains, shows recovery

By Don Hogsett -- Home Textiles Today, 6/9/2003 12:00:00 AM

TEMPE, AZ —

While still subdued, the American manufacturing sector, a principal driver of the overall economy, showed signs of launching a recovery and gained strength substantially in May, recovering from declines during the prior four months, the nation's purchasing managers reported in a key economic indicator.

The Institute for Supply Management's May canvass of the nation's purchasing managers, who order and write the checks for raw materials and supplies, said manufacturing activity, while still stalled, improved in May, recording its first gain since December.

Activity stood at a level of 49.4, just beneath the benchmark level of 50, but improved by 4.0 percentage points from 45.4 in April. It was the first upward movement in the key index since December. Beginning in January, manufacturing activity started to contract, largely on war worries.

An index reading under 50 suggests that the manufacturing segment is still contracting, but the May jump suggests that it's contracting far more slowly and may be in a recovery mode now that war jitters have subsided.

Two key components of the index — production and new orders — rallied in May, both climbing above the crucial level of 50, pointing to expansion in the sector. The New Orders Index shot up by 6.7 percentage points to a level of 51.9, and production grew by 4.5 percentage points, to a reading of 51.5.

"There are signs of life in manufacturing, as both the New Orders Index and the Production Index rose above the 50 percent mark after each had seen two consecutive months of decline," said Norbert J. Ore, chairman of the Institute for Supply Management's Manufacturing Business Survey Committee.

In good news for manufacturers, the Prices Index, which measures the prices companies pay for raw materials and supplies, tumbled substantially, by 12.0 percentage points, to 51.5 from April's reading of 63.5. The May reading above 50 suggests that prices are still rising, but now at a much slower pace.

May snapshot
Manufacturing benchmarks
month-over-month percentage-point change