ISM: AMERICAN MANUFACTURING UNEXPECTEDLY ENTERS CONTRACTION

ISM's monthly manufacturing report is out.

The headline index unexpectedly fell to 49.0 from 50.7 last month, marking the lowest reading since June 2009.

Economists were looking for an increase to 51.0.

Any reading below 50 on the index indicates contraction. Today's ISM release suggests that the American manufacturing sector entered into contraction for the first time since November 2012.

Below is a snapshot of the changes in the various sub-components of the index in May:

Below is what survey respondents are saying:

"Customers are anticipating resin price decreases and holding back orders." (Plastics & Rubber Products)"Slight uptick in overall business but not substantial." (Textile Mills)"Government spending has tightened, which has moved out program awards and caused some reduction in force." (Computer & Electronic Products)"Market outlook is relatively flat, with some promise of raw materials inflation relaxing." (Electrical Equipment, Appliances & Components)"General economy seems sluggish and pensive. Buyers are not buying much beyond lead times." (Fabricated Metal Products)"Downturn in European and Chinese markets is having a negative effect on our business." (Machinery)"We are having a difficult time hiring skilled employees." (Transportation Equipment)"Business continues to increase, but over the past 20 days we have seen the trend flatten." (Furniture & Related Products)"Market was holding strong until mid-month — then softened." (Wood Products)"Decline in sales for FYQ2 over same period a year ago due to softer demand [in] both domestic and exports." (Chemical Products)

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