WASHINGTON (AP) — U.S. manufacturing activity expanded in May at the slowest pace in 20 months, the latest sign that a sharp rise in energy prices is hampering economic growth.
The Institute for Supply Management, a trade group of purchasing executives, said Wednesday that its index of manufacturing activity fell to 53.5 percent in May from 60.4 in April. While that marked the 22nd straight month of growth, the decline was the biggest since 1984. Any reading above 50 indicates growth.
Separately, the Commerce Department said builders began work on more home-remodeling projects to boost construction spending for the second straight month. But the 0.4 percent increase in April barely lifted spending above its lowest level in more than a decade.
The overall increase followed a tiny 0.1 percent rise in March and pushed construction spending to a seasonally adjusted annual rate of $765 billion. That was up just 0.5 percent from an 11-year low of $761 billion hit in February.
The manufacturing index had topped 60 for the first four months of the year. Manufacturers had increased production to meet overseas demand for computers and other long-lasting equipment.
Although manufacturers in most industries reported growth in May, all said they felt squeezed by the rising costs of fuel, chemicals, metals and other inputs. High prices for oil and other commodities have also dampened consumer spending, which has led to less demand for factory goods.
The survey showed a sharp decrease in demand for manufactured goods both in the U.S. and abroad. Indexes for new orders, production and order backlogs showed the steepest declines. New orders and order backlogs were at 51.0 and 50.5, respectively, suggesting that they are barely growing.
Three industries contracted: printing; furniture; and food, beverage and tobacco. All three are closely linked to spending by consumers.
And an index of manufacturers' inventories swung from growth to contraction. That suggests manufacturers are replenishing their stockpiles at slower paces after selling off excess goods that they produced during periods of stronger demand.
The survey also found that the overall economy grew for the 24th straight month.
The ISM, a trade group of purchasing executives based in Tempe, Ariz., compiles its manufacturing index by surveying about 300 purchasing executives across the country.