Manufacturing activity in the U.S. expanded at a slightly faster pace in the month of May, according to a report released by the Institute for Supply Management on Tuesday.

The ISM said its manufacturing PMI inched up to 61.2 in May from 60.7 in April, with a reading above 50 indicating growth in the manufacturing sector. The uptick surprised economists, who had expected the index to come in unchanged.

The modest increase by the headline index reflected an acceleration in the pace of new orders growth, as the new orders index climbed to 67.0 in May from 64.3 in April.

On the other hand, the report showed the production index slid to 58.5 in May from 62.5 in April, indicating a slowdown in the pace of growth.

The employment index also fell to 50.9 in May from 55.1 in April, suggesting only modest job growth as companies continue to note significant difficulties in attracting and retaining labor.

The ISM also said the supplier deliveries index rose to 78.8 in May from 75.0 April, as suppliers continue to experience difficulties in meeting customer demand. A reading above 50 indicates slower deliveries.

Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee noted the continued expansion in manufacturing comes even though worker absenteeism, short-term shutdowns due to part shortages, and difficulties in filling open positions continue to limit the sector’s growth potential.

“The manufacturing recovery has transitioned from first addressing demand headwinds, to now overcoming labor obstacles across the entire value chain,” said Fiore.

On the inflation front, the report showed the prices index dipped to 88.0 in May from 89.6 in April, indicating a modest slowdown in the pace of price growth.

The ISM is scheduled to release a separate report on Thursday on activity in the service sector in the month of May. The services PMI is expected to inch up to 63.0 in May from 62.7 in April.

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