The manufacturing economy slowed further in May as companies cope with uncertainty, the Institute for Supply Management said today.
The Tempe, Ariz.-based group’s manufacturing index, known as the PMI, slipped to 46.9% for the month, down from 47.1% in April.
An index reading below 50% indicates economic contraction. May was the seventh consecutive month in negative territory.
Manufacturers are concerned about the economy’s future, Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call.
“Are we going to see a recession or not?” Fiore said. “We’ve been talking about this for a year.”
Interest rates are also a concern, Fiore said. The Federal Reserve has boosted interest rates to cool the economy and combat inflation. “We’re still in this period of uncertainty,” he said.
The PMI is based on a survey of executives in 18 industries. Four industries reported economic expansion, including transportation equipment and fabricated metal products. Fourteen reported contraction, including primary metals, petroleum & coal products, chemical products, and machinery.
The index is considered a leading economic indicator and a barometer of where manufacturing is headed. The PMI has averaged 49.4% in the past 12 months.
ISM’s New Orders Index fell to 42.6% in May from 45.7% the month before. New orders are considered important because those orders affect production later. Three industries reported an increase in orders while 12 reported a decline.
The institute’s Production Index improved to 51.1% last month from 48.9%. Seven industries reported gains in output while seven reported declines.
ISM’s Employment Index improved to 51.4% in May from 50.2% in April. Five industries reported job increases and four reported employment declines.
Fiore said manufacturers have tried to hold onto workers. That may change without increases in new orders.
“People are going to have to make difficult decisions in the next few months,” he said.
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