US manufacturing sector cooling

Manufacturing in the United States declined last month as a result of inflation surging to its highest rate in over four years, with real fears of stagflation.

The Institute for Supply Management said its index of national factory activity rose to 49.6 in May, from last month’s 48.6, although the ISM report also revealed a negative trend in relation to prices paid, as the index jumped to 87.0 which is an indication of the rate of inflation.

Manufacturing is contracting and the slowdown is not accelerating, as factory production has slowed as well a period of faltering sales.

Ford Motor Co. expects that industry sales will drop to a 15-year low of 14.7 million in 2008 and is reducing its output for the year.

Although manufacturing is at its lowest ebb since 2003, construction spending fell are less than expected in April and so many analysts are arguing that the economy is weak. However, recession is not being considered as the RBS/NTC Eurozone Purchasing Managers Index for the manufacturing sector eased to 50.6 last month.

However, some light has been cast for exports, a weaker dollar makes American goods cheaper and demand will increase.

Story link: US manufacturing sector cooling