WASHINGTON — A measure of U.S. manufacturing fell in May to its lowest level since June 2009 as slumping overseas economies and weak business spending reduced new orders and production.
The Institute for Supply Management said Monday that its index of manufacturing activity fell to 49 last month from 50.7 in April. That’s the lowest level in nearly four years and the first time the index has dipped below 50 since November. A reading under 50 indicates contraction.
Monday’s report showed that a gauge of new orders fell to 48.8, the lowest in nearly a year. Production dropped to its lowest point since May 2009, and employment dipped.
Manufacturing has struggled this year as weak economies abroad have slowed U.S. exports.
At the same time, consumers are holding back on spending more for factory-made goods, possibly a result of higher Social Security taxes, which have reduced most workers’ paychecks this year.
Monday’s weak manufacturing reading suggests that the economy will slow in the April-June quarter from its 2.5 percent annual pace in the first three months of the year.
The drop below 50 in the ISM’s index does not mean the overall economy is shrinking. Manufacturing represents just a small fraction of U.S. output.
“The other 88 percent of the economy appears to be doing better, led by housing,” said Jim O’Sullivan, an economist at High Frequency Economics, a forecasting firm.
