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Manufacturing Continues to Grow; Price Indexes Fall Slightly

Manufacturing activity continued to improve in May, climbing 0.9 percent on its third straight monthly gain of about 1 percent, according to the Federal Reserve. Meanwhile, the Producer Price Index was down 0.3 percent in May, and the Consumer Price Index fell 0.2 percent, the Department of Labor reported this week.

May's manufacturing output was 7.9 percent above May 2009. In addition, manufacturing was up 4.2 percent for the first five months of the year, compared with the end of last year, said Bob Costello, chief economist for the American Trucking Associations, in his Weekly Economic Recap.

According to Costello, most industrial production sectors grew in May, including auto production, with a 5.5 percent increase. Primary metal production was up 2.3 percent, while fabricated metal gained 1.9 percent. Machinery rose 2 percent in May.

Total manufacturing production jumped 8.4 percent from May 2009, the largest year-over-year boost since February 1998, Costello said.

This week, the Department of Labor released its Producer Price Index, which measures changes in prices received by producers of goods and services. The overall PPI was down 0.3 percent, follow a 0.1 percent decrease in April and a 0.7 percent gain in March.

However, the PPI for the output of transportation and warehousing industries was up 0.4 percent in May, primarily due to a 0.8 percent increase in prices received by the trucking industry, the DOL report said. According to Costello, the truckload index advanced at a much faster pace than the less-than-truckload index, on a year-over-year basis. Truck transportation was up 2.7 percent from May 2009.

Along with the PPI, the Consumer Price Index also fell in May, contracting 0.2 percent. Compared with May 2009, the index increased 2 percent.

"Both inflation reports show that price increases, in general, are not a problem, which suggests the Fed can postpone interest rate hikes until late this year or early next year," Costello said.

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