- ISM Manufacturing for May fell to 51.4 versus estimates of 52.0 and a reading of 53.3 in April.
- ISM Prices Paid for May fell to 58.0 versus estimates of 67.5 and a reading of 71.0 in April.
BOTTOM LINE: US construction spending rose in April to an all-time record level. Homebuilding gained .6% and accounted for more than half the total. Non-residential construction rose 1.3% in April, the highest since May 2002. Construction of commercial buildings rose 3.8%. Thirty-year mortgage rates have averaged 5.78% this year, near the four-decade low of 5.21% seen in June 2003. The average since the start of 1980 is 9.58%. I continue to believe construction will help sustain modest US growth through at least year-end.
The pace of US manufacturing growth slowed in May for a sixth straight month. The index is the lowest since June 2003. However, it wasn’t as bad as I had feared. The new orders gauge of the index fell to 51.7 from 53.7 in April. The production index fell to 54.9 from 56.7. The ISM Prices Paid Index fell to 58.0, the lowest since September 2003, from 71 in April. Prices Paid has now plunged 34.1% since April 30, 2004. The employment component of the index decreased to 48.8 from 52.3 in April. The French vote and much better inflation readings are spurring the recent rally in bonds. I do not agree with those that say it is projecting a substantial fall in US growth. The ongoing inventory correction will likely continue for a couple more months. However, I expect manufacturing activity to accelerate thereafter as consumer spending remains very healthy.
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