Manufacturers Optimistic Despite Lower Activity

Washington, DC, June 1 2011 -- A number of economic reports last week continued to show declines in manufacturing activity, with growth below the rapid paces in prior months, according to Chad Moutray, chief economist for the National Association of Manufacturers.

Manufacturing has been one of the strongest sectors of the economy in the last two years.

He noted that surveys from the Kansas City and Richmond Federal Reserve Banks reported declines in new orders and shipments among manufacturers. He said that supply chain disruptions account for much of the decline, particularly for durables.

Pricing pressures also remain strong, he said.

Rising food and energy costs are squeezing consumers, and the result has been that consumer spending, when adjusted for inflation, has been virtually flat for the first four months of this year and the U.S. savings rate has declined.

With gasoline prices starting to fall nationwide, however, the Reuters/University of Michigan Consumer Sentiment Survey rose in May, and consumers were more optimistic about future growth and less worried about inflation.

Manufacturers also remain positive overall about the next six months, Moutray said, highlighted in two regional Federal Reserve surveys.