The Purchasing Managers’ Index (PMI) fell 0.7 percentage points to 52.1% in May, from April, as economic activity in the manufacturing sector expanded, and the overall economy grew for the 121st consecutive month, according to the Institute for Supply Management (ISM). A reading above 50% indicates the manufacturing economy is expanding, and below 50% indicates it’s contracting.
The new orders index rose 1 percentage point to 52.7% in May, from April. The production index declined 1 percentage point to 52.7%. The production index fell 1 percentage point to 51.3%. The employment index rose 1.3 percentage points to 53.7%. The supplier deliveries index declined 2.6 percentage points to 52%. The inventories index fell 2 percentage points to 50.9%. The prices index rose 3.2 percentage points to 53.2%.
Business continued to expand but at “soft levels” similar to expansion levels in early 2016, according to the ISM. Demand continued to rise as the new orders index rose but remained in the low 50s. The customers’ inventories index was at a “too low” level, and the backlog of orders index fell for the first time since January 2017. Consumption, which comprises production and employment, rose and led to a combined PMI contribution of 0.3 percentage points. Inputs, which include supplier deliveries, inventories and imports, fell in May because inventory softened and suppliers increased their delivery speed, leading to a combined 4.6-percentage point decline in the suppliers deliveries and inventories indexes. Imports fell for the second consecutive month. Inputs reflect the ability of supply chains to respond faster and show that supply managers are watching inventories. Prices remained at a stable level.
The PMI has shown that expansion is slowing, and despite concerns for an escalation in the trade dispute between China and the United States, overall sentiment was positive, according to the ISM.
Following 11 manufacturing industries reported growth in May: printing and related support activities; furniture and related products; plastics and rubber products; textile mills; miscellaneous manufacturing; electrical equipment, appliances and components; computer and electronic products; chemical products; food, beverage and tobacco products; nonmetallic mineral products; and machinery. Following six industries reported contraction in May: Apparel, leather and allied products; primary metals; petroleum and coal products; wood products; paper products; and fabricated metal products.