ISM Issues May Purchasing Managers Report: PMI® at 52.1%

Economic activity in the manufacturing sector expanded in May, and the overall economy grew for the 121st consecutive month, say the nation’s supply executives in the latest Manufacturing ISM^® Report On Business^®.

The report was issued by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management^® (ISM^®) Manufacturing Business Survey Committee: “The May PMI^® registered 52.1 percent, a decrease of 0.7 percentage point from the April reading of 52.8 percent. The New Orders Index registered 52.7 percent, an increase of 1 percentage point from the April reading of 51.7 percent. The Production Index registered 51.3 percent, a 1-percentage point decrease compared to the April reading of 52.3 percent. The Employment Index registered 53.7 percent, an increase of 1.3 percentage points from the April reading of 52.4 percent. The Supplier Deliveries Index registered 52 percent, a 2.6-percentage point decrease from the April reading of 54.6 percent. The Inventories Index registered 50.9 percent, a decrease of 2 percentage points from the April reading of 52.9 percent. The Prices Index registered 53.2 percent, a 3.2-percentage point increase from the April reading of 50 percent.

“Comments from the panel reflect continued expanding business strength, but at soft levels consistent with the early-2016 expansion. Demand expansion continued, with the New Orders Index strengthening, but remaining in the low 50s, the Customers’ Inventories Index remaining at a ‘too low’ level, and the Backlog of Orders Index contracting for the first time since January 2017. Consumption (production and employment) continued to expand, resulting in a combined PMI^® contribution of 0.3 percentage point. Inputs — expressed as supplier deliveries, inventories and imports — were lower this month, primarily due to inventory softening and supplier’s continuing to deliver faster, resulting in a combined 4.6-percentage point reduction in the Supplier Deliveries and Inventories indexes. Imports contracted for the second straight month. Overall, inputs reflect supply chains’ ability to respond faster and indicate that supply managers are closely watching inventories. Prices remain at a relatively stable level.

“Respondents expressed concern with the escalation in the U.S.-China trade standoff, but overall sentiment remained predominantly positive. The PMI^® continues to reflect slowing expansion,” says Fiore.

Of the 18 manufacturing industries, 11 reported growth in May, in the following order: Printing & Related Support Activities; Furniture & Related Products; Plastics & Rubber Products; Textile Mills; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Chemical Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; and Machinery. The six industries reporting contraction in May — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Petroleum & Coal Products; Wood Products; Paper Products; and Fabricated Metal Products.

What respondents are saying:

• “Ongoing tariffs [issue is] impacting costs and influencing supplier realignment on country of origin. Border issue is causing delays in imports from Mexico.” (Computer & Electronic Products)
• “The threat of additional tariffs has forced a change in our supply chain strategy; we are shifting business from China to Mexico, which will not increase the number of U.S. jobs.” (Chemical Products)
• “Sales continue to decline. Volumes are off, [and] profits haven’t decreased in proportion to sales. Higher-margin vehicles continue strong sales, but low- to mid-range sales are down.” (Transportation Equipment)
• “Sales remain strong. Labor remains tight. Tariffs are having a significant impact on cost of goods. No impact on where we buy our goods.” (Food, Beverage & Tobacco Products)
• “Business is continuing to grow and expand. The pressure for driving out costs has increased significantly, and my company is facing major changes over the next several years to remain cost competitive.” (Miscellaneous Manufacturing)