The overall economy reached nine years and one month of consecutive growth in May according to the nation’s supply executives in the latest Manufacturing ISM® Report On Business®. The report also showed strong economic activity in the manufacturing sector, but some concerns were expressed about the impact of the Trump Administration's trade tariffs on steel would have on prices.
The Prices Index registered 79.5 percent in May, a 0.2 percentage point increase from the April reading of 79.3 percent, indicating higher raw materials prices for the 27th consecutive month.
The May PMI® registered 58.7 percent. PMI is an indicator of the economic health of the manufacturing sector; it's based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
The New Orders Index registered 63.7 percent, an increase of 2.5 percentage points from the April reading of 61.2 percent. The Inventories Index registered 50.2 percent, a decrease of 2.7 percentage points from the April reading of 52.9 percent.
“Comments from the panel reflect continued expanding business strength," said Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® Manufacturing Business Survey Committee. "Demand remains strong, with the New Orders Index at 60 or above for the 13th straight month, and the Customers’ Inventories Index remaining at very low levels. The Backlog of Orders Index continued expanding, with its highest reading since April 2004, when it registered 66.5 percent. Consumption, described as production and employment, continues to expand in spite of labor and skill shortages. Inputs, expressed as supplier deliveries, inventories and imports, had expansion declines, due primarily to inventory reductions likely caused by supplier performance issues. Lead-time extensions, steel and aluminum disruptions, supplier labor issues, and transportation difficulties continue. Export orders expanded at slower rates. The Prices Index is at its highest level since April 2011, when it registered 82.6 percent. Demand remains robust, but the nation’s employment resources and supply chains continue to struggle. Respondents say price pressure at their companies is causing price-increase discussions as we prepare to enter H2.”
Of the 18 manufacturing industries, 16 reported growth in May, in the following order: Textile Mills; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Printing & Related
Support Activities; Fabricated Metal Products; Furniture & Related Products; Machinery; Chemical Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Petroleum & Coal Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Transportation Equipment; Paper Products; and Primary Metals. No industry reported a decrease in PMI® in May compared to April.