Bloomberg News

WASHINGTON - U.S. manufacturing expanded in May at the slowest pace in more than a year as growth in production and new orders slowed, an industry survey of executives showed.

A gauge of prices paid for raw materials declined to its lowest point in eight months.

Separately, the Commerce Department reported construction spending fell 0.6% in April, to $757.3 billion, following a 0.8% increase in March. April's decline was the first since September and the biggest since May 1999.

Also, the Labor Department reported that first-time jobless claims rose 1,000 last week, to 286,000. That followed an increase of 7,000, to 285,000, the previous week. So far this year, however, initial claims have averaged 278,000 a week, against 298,000 for all of last year.

The National Association of Purchasing Management said its monthly factory index fell to 53.2 in May from 54.9 in April. May's reading is the lowest since April 1999, when the index was 52.7.

Stocks and Treasury securities gained after the report. Smaller gains last month in new orders are "a good indicator that manufacturing is slowing," said Norbert Ore, chairman of the association's factory survey committee. "It's an indicator the overall economy is slowing.''

With a reading above 50, the factory index still suggests an expansion, if at a slower rate. The index has been at 50 or higher for 16 months, as U.S. factories have busied themselves supplying both overseas customers and U.S. consumers.

U.S. factories are expected to stay busy as business inventories remain low. Inventories rose only 0.3% in March, as sales surged 1.2%. So long as sales remain robust, inventories will remain tight and factories will be asked to keep up production, analysts said. Also, some manufacturers still have a big backlog of orders not yet delivered, which will help keep production firm over the coming months.

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