NEW YORK — Dark clouds continue to hang over the economy: The manufacturing sector shrank for the fourth consecutive month, construction spending has been falling for more than two years, future orders are down, and prices are skyrocketing.
The few bright spots, such as strong exports, may be the only things between us and a protracted recession, analysts said Monday.
“It’s exports, and, of course, government spending, that’s keeping us above water,” said John Silvia, chief economist at Wachovia.
The Institute for Supply Management said Monday that its manufacturing index rose to 49.6 from 48.6 in April. It beat expectations of 47.9, according to the consensus estimate of Wall Street economists surveyed by Thomson Financial/IFR.
Still, it was below a reading of 50, signaling that business for machine-tool makers, chemical producers, food companies and many other industries is contracting.
And it appears activity could continue to shrink. Order backlogs, an indication of future work, fell 5.5 percentage points lower than April’s.
The report is “not a number that gives you a clear signal that things are going to improve dramatically, but given the overall report, it gives you some optimism,” said Oscar Gonzalez, an economist at John Hancock Financial Services. “At least by this report, the economy is not heading into a severe recession.”
