The Institute for Supply Management said yesterday its report on business rose to 42.8 in May from 40.1 in April.

Economists polled by Thomson Reuters predicted the index would rise to 42.2.

“While employment and inventories continue to decline at a rapid rate and the sector continued to contract during the month, there are signs of improvement,” said Norbert J. Ore, chairman of the institute’s manufacturing business survey committee. “May is the first month of growth in the new orders index since November 2007, with nine of 18 industries reporting growth. New orders are considered a leading indicator, and the index has risen rapidly after bottoming at 23.1% in December 2008.”

“Also, the customers’ inventories index remained below 50% for the second consecutive month, offering encouragement that supply chains are starting to free themselves of excess inventories as nine industries report their customers’ inventories as 'too low,’” he said. “The prices that manufacturers pay for raw materials and services continued to decline, but at a slower rate than in April.”

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