Today's report on May manufacturing activity from the Institute of Supply Management was worse than expected -- or better, I'm not sure.  From MarketWatch:

Factory activity in the U.S. decelerated in May for the sixth-straight month, the Institute for Supply Management reported Wednesday. 

The ISM index fell to 51.4% in May from 53.3% in April. This is the lowest level since June 2003. Read full survey.

The decline was sharper than expected, but stayed above 50%, which indicates that most firms say business is getting better or at least no worse. The index was last below 50% in May 2003.

The consensus forecast of estimates collected by MarketWatch was for the index to slip to 52.1%.

OK -- it was worse than expected.  But wait.  Here is the next sentence of the article:

Stocks staged a relief rally that the ISM number wasn't as bad as some had expected.

Got it?  Here's some help interpreting things, in case you're still confused:

Economists said it remained to be seen how much lower the ISM will go.

"It is obvious that the manufacturing sector is slowing. The real question is the extent of the slowdown," said Joel Naroff, president of Naroff Economic Advisors.

He attributed part of the slowdown to the U.S. vehicle sector and said the weakness was not a sign of real weakening in the overall economy.

A similar line appears in regard to a not-good looking employment report:

The employment index fell to 48.8% from 52.3%. This is the first time the index has fallen below 50% in 18 months.

However:

Economists at Lehman Brothers said in a note to clients that they aren't too concerned about the contraction in manufacturing employment because the job growth in the sector has been weak for some time.

Beyond that, here were some not-bad looking aspects of the report as well:

The price index fell sharply to 58% from 71% in April...

Inventories were barely changed, slipping to 47.8% from 47.9%.

Also commenting on the ISM report:

Stumbling and Mumbling argues this type of weakness in manufacturing can help us understand why long-term interest rates have been so slow to rise.

Over at Economist's View, Tim Duy looks at the market reaction and says "whoa Nelly," while issuing this useful reminder:

The Fed makes policy for the whole economy, not individual sectors. The ISM needs to be part of an overall weaker story to trigger a Fed reaction.

(You might like his comments on today's remarks from Dallas Fed president Richard Fisher.)