(Bloomberg) -- The U.S. Manufacturing Purchasing Managers' Index fell by more than two-points to 50.5 in May, the lowest level since Sept. 2009, according to IHS Markit. New orders contracted for the first time since August 2009.
The overall index has fallen by almost six points over the last year.
“May saw U.S. manufacturers endure the toughest month in nearly 10 years, with the headline PMI down to its lowest since the height of the global financial crisis,” said Chris Williamson, economist at IHS Markit. Manufacturing “production is set to act as a further drag on GDP.”
Survey respondents stated that weak client demand drove the drop in new orders for the first time in almost a decade. Some firms also noted that customers were postponing orders due to growing uncertainty about the outlook. Similarly, new business from abroad contracted by the quickest pace since April 2016 to the first decline since July 2018.
Employment growth was the slowest since March 2017. The report cited anecdotal evidence that there was a large level of churn in the employment market as workforce additions were linked to the replacement of voluntary leavers and retirees.
Despite rising costs due to tariffs, inflation was tame. Profits are under pressure.
“Both producers and their suppliers often reported the need to hold selling prices lower amid lackluster demand. While this bodes well for inflation, profit margins are clearly being squeezed as a result,” said Williamson.
To contact the reporter on this story: Alexandre Tanzi in Washington at atanzi@bloomberg.net
To contact the editors responsible for this story: Alexandre Tanzi at atanzi@bloomberg.net, Chris Middleton
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