(Adds comment from ISM statement)
By Rodrigo Campos
June 2 The Institute for Supply Management
corrected its key manufacturing activity index for May to 55.4,
nearly in line with expectations, after economists on Monday
said the original release's reading of 53.2 was incorrect.
The report initially suggested a weakening in the pace of
factory-sector growth, but economists, including Stone &
McCarthy Research Associates, said seasonal adjustments appeared
to have been incorrectly applied to the figures.
It took ISM nearly three hours to issue an official
statement revising the data. CNBC initially reported the
correction would be to a reading of 56.
The 55.4 figure was in line with what Stone & McCarthy said
it should be after running the numbers themselves after the
initial 10 a.m. EDT (1400 GMT) release.
Kenneth Kim, economist at Stone & McCarthy in Princeton, New
Jersey, said he took the numbers from ISM's website but found
that his result "wasn't adding up to their (ISM's) reported
He then ran the calculations using the seasonal adjustment
factor applied to April's report, not May's, and the numbers
were the same as those reported.
"That was confirmation on where the mistake happened," Kim
said. He said he reached out to ISM earlier in the day to point
out his findings but received no response.
ISM later said in a statement the error was caused "when the
software incorrectly used the seasonal adjustment factor from
the previous month."
The weaker-than-expected initial report weighed on stocks
and helped bond prices, while cutting into the U.S. dollar's
After chatter of a correction started making the rounds,
investors sold U.S. Treasuries, boosting the yield to a high of
about 2.54 percent on the changed data.
The stock market reacted positively, rebounding from modest
losses. The S&P 500 was lately up fractionally.
"People are still looking for signs that the economy is
recovering, and the first ISM number had people questioning the
strength of the economy," said John Carey, portfolio manager at
Pioneer Investment Management in Boston, which has about $220
billion in assets under management.
"This revision gives us more reason to be confident, and it
isn't surprising to see stocks recover a bit, since we're so
sensitive to data right now."
Sub-indexes in the report on new orders and employment were
also higher than initially reported.
(Reporting By Rodrigo Campos and Ryan Vlastelica; Editing by
Chizu Nomiyama and Meredith Mazzilli)