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US Factory Activity Edges Up, but Growth Sluggish: Markit

Ariana Lindquist | Bloomberg | Getty Images

U.S. manufacturing picked up slightly in May, though the pace was still sluggish, a survey showed Monday, suggesting the sector may be a drag on the economy in the second quarter.

Financial data firm Markit said its final Manufacturing Purchasing Managers Index (PMI) rose to 52.3 from 52.1 in April, better than the preliminary reading of 51.9. A reading above 50 indicates expansion.

Growth in output eased for the third-straight month, with the subindex slipping to 52.7 from 53.7, while the pace of hiring in the sector fell to a six-month low.

(Click here to track the U.S. stock market following the report in premarket trade.)

"The survey paints a downbeat picture of U.S. manufacturing business conditions. Output, order books and employment are all growing modestly, suggesting the sector is at risk of stalling," said Chris Williamson, Markit chief economist.

The gauge of new orders from domestic clients edged up to 53.3 from 51.5, helping the index improve slightly on April's result. That also helped make up for a decline in overseas orders, which fell for the first time in three months.

Williamson said slower growth in the factory sector was likely to contribute to weaker U.S. growth in the second quarter.

The economy expanded at a 2.4 percent pace between January and March, a hefty jump over 0.4 percent in the final three months of 2012.

(Read More: US Manufacturing Shrinks; Construction Spending Up)

But economists suspect a manufacturing slowdown and a drop in government spending could sap it of momentum in the second quarter, repeating a pattern seen over the past two years.

A separate report from the Institute for Supply Management showed manufacturing growth slowed in April, and the May report, due later on Monday, was expected to show the sector lost more momentum in May.

Consumer spending also fell in April for the first time in nearly a year, and price pressures were subdued, suggesting the Federal Reserve may have to maintain its monetary stimulus for a while.

(Read More: Is Another Turbulent Month in Store for Markets?)

The Markit index found that goods-producing firms reported higher input prices in May, though the rate of increase remained much weaker than that seen at the start of the year. Output charges rose modestly on the month.

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