US manufacturing stabilising at depressed level, ISM data show

[WASHINGTON] A closely watched measure of US manufacturing rose in May for the first time in four months, suggesting the industry is beginning to stabilise at a depressed level after a pandemic-driven plunge.

The Institute for Supply Management said Monday that its gauge improved to 43.1 last month from an 11-year low of 41.5 in April. Readings below 50 indicate shrinking activity. The purchasing managers group's gauges of production and factory employment edged up from multi-decade lows, while an index of orders rose after the largest single-month slump since 1951.

While the data indicate producers are beginning to claw their way back as states begin reopening battered economies, weak export markets, record unemployment and lean capital spending budgets pose significant challenges.

"I believe we can see or are at the bottom of the toboggan run, which is a positive for June in spite of May's numbers," Timothy Fiore, chairman of the ISM Business Survey Committee, said on a call with reporters. May was a transition month, and demand, output and employment should return to some extent in June, he said.

The median forecast in a Bloomberg survey of economists called for the ISM factory index to rise to 43.8 in May. Six industries, including food, paper, clothing and apparel, reported growth in May. Eleven industries reported activity shrank.

A separate report Monday showed US construction spending in April fell by less than expected, indicating most of the sector was able to continue operating during the pandemic. Spending fell 2.9 per cent from the prior month, compared with analyst estimates for a 7 per cent decline, and was actually up 3 per cent from April 2019.

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The supply managers group's index of new orders increased to 31.8 from an April reading of 27.1. Only four industries reported growth in bookings during May. The ISM's production measure rose to 33.2 from 27.5.

BLOOMBERG