The pace of growth in the U.S. manufacturing sector slowed unexpectedly in May as measures of new orders and production declined and factories added jobs at a slower pace, according to an industry report released Monday.
The Institute for Supply Management (ISM) said its index of manufacturing activity fell to 53.2 last month from 54.9 in April. Economists expected activity to increase.
In the ISM survey, any reading above 50 signifies expansion in the manufacturing sector, while a reading below 50 indicates contraction.
The new-orders sub-index fell to 53.3 last month from 55.1 in April, and the employment sub-index fell to 51.9 from 54.7. The sub-index of prices paid by manufacturers jumped to 60 from 56.5, a sign that factories are paying more for raw materials. If companies pass along those costs to consumers, that could lift inflation in coming months.
The retreat in the ISM index is the latest sign that manufacturing activity is growing only at a modest pace.