Manufacturing slowdown hints at weak recovery

WASHINGTON -- 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 yesterday that its index of manufacturing activity fell to 53.5 percent in May from 60.4 in April.

Any reading above 50 indicates growth in manufacturing. May marked the 22nd straight month of expansion. Still, May's figure was the weakest since September 2009 and the decline from April's pace was the sharpest one-month drop since 1984.

The weak data offered the latest evidence that the economy is hitting a second "soft patch" nearly two years after the recession officially ended. Stocks plunged Wednesday after the reports were released -- the Dow Jones industrial average fell more than 279 points.

The index had topped 60 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.

Manufacturing represents only about 11 percent of U.S. economic activity.