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World Factory Sector Output Shifts to Lower Gear

Economics / Global Economy Jun 02, 2011 - 03:01 AM GMT

By: Asha_Bangalore

Economics

The ISM manufacturing survey results of May show a decelerating trend in factory activity. The composite index declined to 6.9 points to 53.5 in May, which marks the third consecutive monthly drop. The sharp declines of indexes tracking new orders (-10.7 to 51.0) and production (- 9.8 to 54.0) are worrisome.


Index readings greater than 50 denote an expansion in factory activity, while readings below 50 signify a contraction. The drop of the April-May average of index measuring exports suggests a smaller contribution from exports to GDP in the second quarter, barring a large increase in June. The price index fell 9.0 points to 76.5 in May, which is the first decline since December. The employment index (61.0 vs. 64.5 in April) is the lowest since January.

A slowdown in the pace of factory activity in China (52.0 vs. 52.9 in April), Euro-zone (54.6 vs. 58.0 in April), India, South Korea, and Taiwan in May bodes poorly for world economic growth in the second quarter.


Source: http://graphics.thomsonreuters.com/11/06/GLB_MPMI0611_SB.gif

Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com

Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

Copyright © 2011 Asha Bangalore

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.


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