MW: Factory sector show signs of improvement in May
ISM hits 42.8%, highest in 8 months
WASHINGTON (MarketWatch) - There were signs of improvement at the nation's manufacturing firms even as activity at the plants continued to slow in May, according to a closely followed survey of top executives released Monday.
The Institute for Supply Management index rose to 42.8% in May from 40.1% in April, above the 42.0% expected by economists surveyed by MarketWatch.
It's the highest reading since September.
Readings below 50% in the ISM diffusion index indicate that more firms are contracting than growing. The ISM tracks the breadth of growth across firms, asking purchasing managers if business is better or worse this month than last.
The ISM bottomed at a 28-year low of 32.9% in December, and has been marching higher steadily since.
A key sub-index, new orders, moved above 50% in May for the first time since November 2007, a sign that some parts of the manufacturing sector at beginning to recover, said Norbert Ore, head of the ISM's survey committee.
Five of 18 industries as tracked by Tempe, Ariz.-based ISM were growing in May, led by mining, plastics, machinery, food and printing. This compares with only one industry in April.
The ISM is computed from a survey of purchasing managers at manufacturing firms. Instead of asking them how many widgets they sold, the ISM asks them if they sold more widgets this month than last.
The resulting survey tells us how broadly based the downturn is among companies, not how deep the downturn is. Any reading under 50% in the ISM shows that business is still getting worse (or getting no better) for most manufacturing companies.
Details of ISM manufacturing report
May new-orders index rose to 51.1% from 47.2% in April, the ISM's data showed.
The production index increased in May to 46.0% from 40.4%.
The prices-paid index rose to 43.5% from 32.0%.
The inventories index fell to 32.9% in May from 33.6% in April.
There was no improvement in the job outlook. The employment index dropped to 34.3% from 34.4% in April.
On Friday, the government will report the change in payrolls and the unemployment rate for May.
Economists surveyed by MarketWatch are looking for payrolls to fall 500,000, the seventh straight month with at least a half a million jobs lost. Economists are looking for an unemployment rate of 9.2%, the highest since 1983.
