Factory growth accelerated last month and did not slow down as initially reported Monday by the Institute for Supply Management, which twice corrected its closely watched purchasing managers index.
The revisions roiled financial markets because they shifted investors’ views how the crucial manufacturing sector performed in May.
ISM at first said that growth in the sector unexpectedly slowed, with the index dropping to 53.2 from 54.9 in April.
The figure was well below economists’ expectations for an increase to about 55.5.
But about two hours after the report was released at 7 a.m. PDT, ISM notified some news organizations that it had incorrectly calculated the index. Instead of dropping in May, it rose to 56, showing that growth picked up.
About 30 minutes later, ISM again revised its figure to 55.4, in line with economists’ forecasts
“We apologize for this error. We have recalculated and confirmed that the actual index indicates that the economy is accelerating,” said Bradley J. Holcomb, chair of ISM’s Manufacturing Business Survey Committee.
“Our research team is analyzing our internal processes to ensure that this doesn’t happen again,” he said.
The Dow Jones industrial average dropped about 30 points on the initial report of a manufacturing slowdown. It then recovered and pushed into positive territory on news of the error. With about 90 minutes left in the regular trading session, the blue-chip gauge up about 25 points on the day.
“What the heck, ISM did not fall 1.7 points in May to 53.2, it increased 0.5 points to 55.4,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi in New York.
“A big 2.2-point swing. Great,” he said. “ISM made a mistake, another reason not to trust anecdotal information on the economy.”
A figure above 50 indicates the sector is expanding. May was the 12th straight month of growth, according to the ISM.