Activity in the U.S. manufacturing sector unexpectedly contracted in May for the first time since November of 2012, according to a report released by the Institute for Supply Management on Monday.
The ISM said its purchasing managers index fell to 49.0 in May from 50.7 in April, with a reading below 50 indicating a contraction in manufacturing activity.
The drop into contraction territory came as a surprise to economists, who had been expecting the index to edge up to a reading of 51.0.
With the unexpected decrease, the ISM's index of activity in the manufacturing sector fell to its lowest level since hitting 45.8 in June of 2009.
James Knightley, senior economist at ING, said, "With the Chinese PMIs not performing particularly well and the Eurozone index remaining in contraction territory, today's ISM report suggests that the global growth story might not be as robust as markets were increasingly pricing in."
"As a result we still see the risk that Federal Reserve QE tapering is delayed until much later in the year with the December FOMC looking as a more likely start point rather than September," he added.
The unexpected drop by the headline manufacturing index reflected contractions in both new orders and production. The new orders index fell to 48.8 in May from 52.3 in April, while the production index slid to 48.6 from 53.5.
The supplier deliveries and backlog of orders indexes also dipped into contraction territory after indicating growth in the previous month.
Meanwhile, the employment index edged down to 50.1 in May from 50.2 in April, although the reading above 50 still indicated a modest increase in employment in the manufacturing index.
The report also showed that the prices index dipped to 49.5 in May from 50.0 in April, pointing to a slight drop in prices.
Bradley J. Holcomb, chair of the ISM Manufacturing Business Survey Committee, said, "Several comments from the panel indicate a flattening or softening in demand due to a sluggish economy, both domestically and globally."
Wednesday morning, the ISM is scheduled to release a separate report on activity in the service sector. The index of service sector activity is expected to inch up to 53.8 in May from 53.1 in April.
For comments and feedback contact: editorial@rttnews.com
Economic News
What parts of the world are seeing the best (and worst) economic performances lately? Click here to check out our Econ Scorecard and find out! See up-to-the-moment rankings for the best and worst performers in GDP, unemployment rate, inflation and much more.
April 24, 2026 15:15 ET Economics news flow was relatively light this week even as the conflict in the Middle East continued, raising concerns for policymakers. In the U.S., spending data, initial jobless claims and pending home sales were the highlights. Business confidence in the biggest euro area economy was in focus in Europe. Inflation data from Japan gained attention in Asia.