The U.S. manufacturing sector expanded for the 12th month in a row in May, the Institute for Supply Management survey reported this morning. The WSJ reported that “demand remained strong and hiring has picked up, but worry about rising prices continued to build.”
The ISM reported a modest increase from April’s 62.4 to 62.8 in May (Readings over 50 indicate expansion in the sector). The “Delta” of improvements is moderating, as the rate of growth in the new-orders and production categories slowed. This is to be expected as the economic recovery matures and as the bulk of the stimulus fades behind us. The pig is now mostly through the python.
ISM also reported a significant increase in employment — it measured 61.9, up from 57.8 in April and the best reading since April 1973’s 62.6. Only 7% of firms polled pared payrolls last month. This bodes well for Firday’s Employment number.
Rising prices — particularly energy costs — are a “major concern.” Higher energy prices could restrain factory expansion in the second half of the year.
The elephant in the room remains the Federal government. Outlays by Uncle Sam rose 7.9%; Compare this with state and local spending, which rose a mere 1.2%.
Any improvement in GDP, hiring and manufacturing is always welcome. However, with the federal government contributing so much to the overall improvement, it leads us to — once again — question how sustainable the present pace of expansion is without Uncle Sams’s largesse . . .
Factory Activity Rises in May; Construction Spending Gains
WSJ, June 1, 2004 11:33 a.m.