The overall economy grew for the forty-eighth straight time, while the manufacturing sector contracted after five months of expansion, the Institute for Supply Management reported Monday.
According to the ISM's monthly report on business, the ISM index slipped to 49.0 in May from 50.7 in April.
Economists polled by Thomson Reuters predicted the index would slip to 50.5.
An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion. A reading of 50 shows the sector was unchanged in the month.
"The PMI registered 49 percent, a decrease of 1.7 percentage points from April's reading of 50.7 percent, indicating contraction in manufacturing for the first time since November 2012 and only the second time since July 2009," said Bradley Holcomb, chair of the Institute of Supply Management's manufacturing business survey committee. "This month's PMI reading is at its lowest level since June 2009, when it registered 45.8 percent. The New Orders Index decreased in May by 3.5 percentage points to 48.8 percent, and the Production Index decreased by 4.9 percentage points to 48.6 percent. The Employment Index registered 50.1 percent, a slight decrease of 0.1 percentage point compared to April's reading of 50.2 percent. The Prices Index registered 49.5 percent, decreasing 0.5 percentage point from April, indicating that overall raw materials prices decreased from last month. Several comments from the panel indicate a flattening or softening in demand due to a sluggish economy, both domestically and globally."
The closely watched prices paid index decreased to 49.5 from 50.0. The employment index slipped to 50.1 from 50.2 the prior month.
The production index decreased to 48.6 from 53.5, the new orders index fell to 48.8 from 52.3; the supplier deliveries index slid to 48.7 from 50.9; the export orders index declined to 51.0 from 54.0; and the imports index fell to 54.5 from 55.0.
The inventories index rose to 49.0 from 46.5; the customers' inventories index gained to 46.0 from 44.5; and backlog of orders dropped to 48.0 from 53.0.
Respondents' comments included:
"Customers are anticipating resin price decreases and holding back orders." (Plastics & Rubber Products)
"Slight uptick in overall business but not substantial." (Textile Mills)
"Government spending has tightened, which has moved out program awards and caused some reduction in force." (Computer & Electronic Products)
"Market outlook is relatively flat, with some promise of raw materials inflation relaxing." (Electrical Equipment, Appliances & Components)
"General economy seems sluggish and pensive. Buyers are not buying much beyond lead times." (Fabricated Metal Products)
"Downturn in European and Chinese markets is having a negative effect on our business." (Machinery)
"We are having a difficult time hiring skilled employees." (Transportation Equipment)
"Business continues to increase, but over the past 20 days we have seen the trend flatten." (Furniture & Related Products)
"Market was holding strong until mid-month - then softened." (Wood Products)
"Decline in sales for FYQ2 over same period a year ago due to softer demand [in] both domestic and exports." (Chemical Products)