May 24 (Bloomberg) -- Manufacturing in the U.S. expanded in May at the slowest pace in three months, indicating the industry that’s spurred the expansion is cooling.
An index based on a survey of purchasing managers at factories fell to 53.9 during the month from 56 in April, London-based Markit Economics said in its preliminary estimate today. A reading above 50 in the purchasing managers’ measure indicates expansion. Production, orders and factory employment expanded at slower rates in May.
Recession in Europe and slower growth in China may be limiting orders and production at U.S. factories. The industry, also feeling the effects of a slowdown in business investment, may provide less of a boost to the economy.
“We’ve hit a bit of a bump in the road,” said Bricklin Dwyer, an economist at BNP Paribas in New York. U.S. manufacturers are still outpacing than their global counterparts, he said. “We’re still in expansionary territory.”
Other U.S. reports today showed a drop in initial jobless claims and a decline in April orders for computers, machinery and other capital equipment.
Bookings for non-military goods excluding aircraft decreased 1.9 percent after falling 2.2 percent in March, the first back-to-back decline in a year, the Commerce Department said. Demand for all durable goods, those meant to last at least three years, rose 0.2 percent, matching the median forecast of economists surveyed by Bloomberg News.
First-time claims for unemployment benefits fell by 2,000 to 370,000 last week, the Labor Department said.
Stocks swung between gains and losses after the data, with the Standard & Poor’s 500 rising less than 0.1 percent to 1,319.9 at 9:44 a.m. in New York.
Markit’s index of production eased to 54.1 in May, the weakest in six months, from 56.4. The gauge of factory employment dropped to 54.3 this month from 56.3, while the measure of orders decreased to a three-month low of 54.8 from 56.9.
The preliminary purchasers’ figure is based on replies from about 85 percent to 90 percent of those American manufacturers who respond to the poll of the more than 600 companies surveyed.
The Markit gauge of U.S. manufacturing was released today for the first time. The company surveys purchasing managers in more than 30 countries and regions including Europe and China. Its euro-area manufacturing index dropped in May to 45, the weakest in 35 months, while China’s factory gauge dropped to 48.7 from 49.3.
Markit said it’s been collecting purchasing data from all areas of American manufacturing since October 2009. The preliminary indexes will be followed by revised figures on the first working day of every month.
The initial figures surface about a week before the Institute for Supply Management’s factory gauge, which is based on the answers to questions asked of more than 400 industrial companies. The Tempe, Arizona-based group’s purchasers’ index is based on five sub-indexes, all with equal weighting, that include new orders, production and employment.
Orders account for about 30 percent of the weighting in the Markit purchasing managers’ index, followed by production at 25 percent and factory employment at 20 percent.
The recovery in manufacturing will be slow, said Mike DeWalt, director of investor relations of Caterpillar Inc. the largest maker of construction and mining equipment.
“Based on how poor 2009 was, how deep the recession was, what happened in the relatively modest improvements in 2010 and 2011, there is a lot of recovery that needs to happen,” DeWalt said at a May 23 conference. “It could be a quite extended recovery, but maybe not as strong as in the past. But our business as a signal has been actually positive.”