(Reuters) - U.S. manufacturing activity slowed for a second straight month in May as new goods orders dropped by the most in nearly two years, but a measure of input inflation fell back from the highest since mid-2022, a monthly survey showed on Monday.

The Institute for Supply Management's manufacturing purchasing managers index for May fell to 48.7 from 49.2 in April. It was both the second straight decline and the second month below the 50 level that separates growth from contraction.

Economists polled by Reuters had a median estimate for 49.6.

The factory sector has been under pressure for well over a year, with ISM's measure of output in contraction now for 18 of the past 19 months, as high interest rates resulting from Federal Reserve monetary policy tightening curbed demand for goods. The year began with broad hopes for the Fed to begin cutting rates by mid-year, but stiffer-than-expected inflation through the first quarter forced central bank officials to push back against those expectations. September is now seen as the earliest reductions might begin.

With borrowing costs stuck at the highest in roughly two decades, ISM's measure of new orders for manufacturers plunged by the most since June 2022, dropping 3.7 points to a reading of 45.4, a one-year low. A report on Friday showed consumer outlays on goods - both durables and nondurables - fell in April amid an overall softening of spending, a trend economists see persisting as household savings dwindle and reliance on credit cards grows.

There was some relief, however, on factory input costs that had been re-accelerating this year after a run of decreases through much of 2023. ISM's prices paid index dropped to 57 from 60.9, which had been the highest level since June 2022. Economists had forecast the index would fall to 58.5.

Factory employment - also in the doldrums for the better part of two years - grew for the first time since last September.