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US factory output growth plunges as costs bite
By Daniel Wagner |
June 3, 2011, Friday
|
Print Edition
Print Edition
US manufacturing activity expanded in May at the slowest pace in 20 months, the latest sign that a sharp rise in energy prices is hampering economic growth.
The Institute for Supply Management, a trade group of purchasing executives, said on Wednesday that its index of manufacturing activity fell to 53.5 percent in May from 60.4 in April.
Any reading above 50 indicates growth in manufacturing. May marked the 22nd straight month of expansion in what's been one of the few sources of strength for the economy since the recession ended nearly two years ago.
Still, last month's figure was the weakest since September 2009. And the decline from April's pace was the sharpest one-month drop since 1984.
Separately, the Commerce Department said builders began work on more home-remodeling projects to boost construction spending for the second straight month. But the 0.4 percent increase in April barely lifted spending above its lowest level in more than a decade. The seasonally adjusted annual rate of US$765 billion is just 0.5 percent higher than an 11-year low hit in February.
Analysts predicted it could be another four years before overall construction spending returns to a more healthy level of around US$1.5 trillion annually. The weak data offered the latest evidence that the economy is hitting a second "soft patch" nearly two years after the recession officially ended.
Stocks plunged after the reports were released. The Dow Jones industrial average fell more than 266 points in afternoon trading. The manufacturing index had topped 60 points for the first four months of the year.
Manufacturers had increased production to meet overseas demand for computers and other long-lasting equipment. Despite growth in May, most manufacturers said they felt squeezed by the rising cost of fuel, chemicals, metals and other inputs.
The Institute for Supply Management, a trade group of purchasing executives, said on Wednesday that its index of manufacturing activity fell to 53.5 percent in May from 60.4 in April.
Any reading above 50 indicates growth in manufacturing. May marked the 22nd straight month of expansion in what's been one of the few sources of strength for the economy since the recession ended nearly two years ago.
Still, last month's figure was the weakest since September 2009. And the decline from April's pace was the sharpest one-month drop since 1984.
Separately, the Commerce Department said builders began work on more home-remodeling projects to boost construction spending for the second straight month. But the 0.4 percent increase in April barely lifted spending above its lowest level in more than a decade. The seasonally adjusted annual rate of US$765 billion is just 0.5 percent higher than an 11-year low hit in February.
Analysts predicted it could be another four years before overall construction spending returns to a more healthy level of around US$1.5 trillion annually. The weak data offered the latest evidence that the economy is hitting a second "soft patch" nearly two years after the recession officially ended.
Stocks plunged after the reports were released. The Dow Jones industrial average fell more than 266 points in afternoon trading. The manufacturing index had topped 60 points for the first four months of the year.
Manufacturers had increased production to meet overseas demand for computers and other long-lasting equipment. Despite growth in May, most manufacturers said they felt squeezed by the rising cost of fuel, chemicals, metals and other inputs.
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