Purchasing Managers Index up again in May

The Institute for Supply Management (ISM) has released its monthly Purchasing Managers Index (PMI) for May, and the story told is another positive one with the PMI at 58.7% — up from April’s reading of 57.3% and well above the reading of 50% that indicates the manufacturing economy is generally expanding. Below 50% indicates it is generally contracting.

A PMI above 50%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the May PMI indicates growth for the 109th consecutive month in the overall economy, and indicates growth in the manufacturing sector for the 21st consecutive month.

According to Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, “Comments from the panel reflect continued expanding business strength. 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.”

Continuing, he noted: “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%. 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.”

The New Orders Index registered 63.7%, an increase of 2.5 percentage points from the April reading of 61.2%. The Production Index registered 61.5%, a 4.3 percentage point increase compared to the April reading of 57.2%.

The Employment Index registered 56.3%, an increase of 2.1 percentage points from the April reading of 54.2%. The Supplier Deliveries Index registered 62%, a 0.9 percentage point increase from the April reading of 61.1%. The Inventories Index registered 50.2%, a decrease of 2.7 percentage points from the April reading of 52.9%. The Prices Index registered 79.5% in May, a 0.2 percentage point increase from the April reading of 79.3%, indicating higher raw materials prices for the 27th consecutive month.

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.