2012.06.01 17:40:44 UPDATE: May Factory Activity Slows But Still Expanding - ISM

--ISM PMI slows to 53.5 from 54.8 in April --New orders index jumps to highest level since April 2011 --Price index shows input costs falling in May (Adds details in first, fifth through eighth, 10th and 12th paragraphs.) By Kathleen Madigan Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- The U.S. manufacturing sector slowed down a bit in May although new orders stayed strong, according to data released Friday by the Institute for Supply Management. Input prices contracted for the first time this year. The ISM's manufacturing purchasing managers' index last month fell to 53.5 from 54.8 in April. A reading above 50 indicates expanding activity. Economists surveyed by Dow Jones Newswires had expected the May PMI to slip only to 53.9. The ISM report came out 90 minutes after the U.S. Bureau of Labor Statistics reported only 69,000 new jobs were created in May, less than half the 155,000 forecasted by economists. Other economic data for May, including regional factory reports and consumer confidence, have come in weaker than expected. The ISM report runs counter to the other weaker numbers but "it reflects exactly what's happening [in manufacturing] in the month of May," said Bradley Holcomb, who oversees the survey for the ISM. What is especially encouraging, he said, is the high level of demand. The new orders index rose to 60.1 from 58.2 in April. The May reading is the highest since April 2011. Even with the problems in economies around the world, foreign demand is still growing. The ISM exports index fell to 53.5 from 59.0 in April. Holcomb said the comments from respondents showed "steady to higher sales" and the gain in new orders was "broad-based." Other ISM indexes weakened but were still in expansion mode. The production index fell back to 55.6 from 61.0. The employment index slowed slightly to 56.9 from 57.3 in April. Earlier Friday, the BLS data showed 16,000 jobs were created in the factory sector last month. The inventory index dropped to 46.0 from 48.5. Holcomb says he measures the difference between new orders and inventory index to gauge future factory activity. The gap in May was 14.1, the highest level since May 2010, suggesting manufacturers will be increasing production. U.S. manufacturers saw price pressures plunge last month. The prices index dropped to 47.5 from 61.0. It was the first reading below 50 since December 2011. -By Kathleen Madigan, Dow Jones Newswires; 212-416-2466; kathleen.madigan@dowjones.com (END) Dow Jones Newswires June 01, 2012 11:40 ET (15:40 GMT)