New good orders fell by the highest amount in nearly two years in May, while construction projects decreased in April, signaling that the U.S. economy may be slowing down.
The manufacturing purchase managers index fell to 48.7 in May from 49.2 in April, according to the Institute for Supply Management. It was the second straight month of slowing, as well as the second month below a rating of 50, which divides growth from contraction. On the construction side, there was an improvement in single-family home building, but non-residential activity saw a drop in April for the second straight month.
Economists thought that gross domestic product would speed up in the second quarter after growing just 1.3% during Q1. However, the Atlanta Fed’s GDP Model was revised down to 1.8% after forecasting a 2% growth rate through May.
The ISM survey data “suggest that higher-than-expected rates this year have reduced business investment and have made businesses more reticent to increase their levels of inventory,” Matthew Martin, U.S. economist at Oxford Economics, said in a research note. “This has led to softer than anticipated demand, with new orders declining and the backlog of orders in contraction.”
