NEW YORK, MAY 31 -- The U.S. economy continued to expand in May, with the National Association of Purchasing Managers' composite index rising to 57.5 percent from 54.2 percent in April, the NAPM said today.

An index reading above 50 percent generally indicates that the economy is expanding, while one below 50 percent implies a declining economy.

It was the tenth consecutive month in which the index has registered above 50 percent, with an average reading of 54.7 percent for the first five months of 1987.

If this rate were sustained for the rest of the year, it would be consistent with real gross national product growth of about 3.2 percent, the NAPM said.

The association said the economic improvement was evident in all of the indicators in the index except inventories, which were stable.

New orders continued to increase in May, but at a slower pace than in April. The rate of growth in production was only slightly lower than in April, the NAPM said.

Also reflecting expanding growth, vendor deliveries slowed considerably in May, in part due to the return to work of United Steelworkers Union members after a long strike, the NAPM said.

Employment increased in May for the third month in a row.

Albert Bretz, chairman of the NAPM's business survey committee and director of materials management at Pitney Bowes Inc., said the economy "showed healthy growth in May. Even without the aid of inventory growth, all indicators point in a positive direction.

"The growth in new orders virtually assures both a good second quarter and first half in 1987," he said.

For the ninth consecutive month, more purchasers indicated that they were paying higher rather than lower prices.

However, for the first time in four months the rate of price increases slowed.

The composite index is a seasonally adjusted figure, based on five components of the NAPM business survey -- new orders, production, vendor deliveries, inventories and employment.

The monthly report is based on questions asked of purchasing managers at 250 U.S. industrial companies.