ISM PMI shows the US manufacturing sector in its worse state since June 2009

The ISM manufacturing purchasing manager's index (PMI) dipped in May to a June 2009 low, dropping from 50.7 to 49, implying that the sector is now contracting. Analysts predicted a smaller decline to 50.5

This contrasted with Markit PMI, which looked brighter as it rose from a flash estimate of 51.9 to 52.3. Economists had anticipated a dip to 52.0.

Commenting on the final PMI data, Chris Williamson, chief economist at Markit said:

The May survey paints a downbeat picture of U.S. manufacturing business conditions. Output, order books and employment are all growing modestly, suggesting the sector is at risk of stalling. The main weakness is from export markets, where new orders fell marginally due to weakening global demand.

There is a possibility that growth may pick up again. The deteriorating export performance is being offset by rising demand in the domestic market, and large firms are reporting the strongest growth of new orders for just over a year.

However, the short-term outlook is one of subdued growth at best, suggesting the recent slowdown in the manufacturing economy will add to the likelihood of GDP growth weakening in the second quarter.