May 2017 Manufacturing ISM Report On Business

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Economic activity in the manufacturing sector expanded in May, and the overall economy grew for the 96th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee: "The May PMI registered 54.9%, an increase of 0.1 percentage point from the April reading of 54.8%. The New Orders Index registered 59.5%, an increase of 2 percentage points from the April reading of 57.5%. The Production Index registered 57.1%, a 1.5 percentage points decrease compared to the April reading of 58.6%. The Employment Index registered 53.5%, an increase of 1.5 percentage points from the April reading of 52%. The Inventories Index registered 51.5%, an increase of 0.5 percentage point from the April reading of 51%. The Prices Index registered 60.5% in May, a decrease of 8 percentage points from the April reading of 68.5%, indicating higher raw materials prices for the 15th consecutive month, but at a noticeably slower rate of increase in May compared with April. Comments from the panel generally reflect stable to growing business conditions, with new orders, employment and inventories of raw materials all growing in May compared to April. The slowing of pricing pressure, especially in basic commodities, should have a positive impact on margins and buying policies as this moderation moves up the value chain."

Of the 18 manufacturing industries, 15 reported growth in May in the following order: Nonmetallic Mineral Products; Furniture & Related Products; Plastics & Rubber Products; Machinery; Primary Metals; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; Transportation Equipment; Chemical Products; Fabricated Metal Products; Petroleum & Coal Products; and Printing & Related Support Activities. Two industries reported contraction in May compared to April: Apparel, Leather & Allied Products; and Textile Mills.

May 2017 Manufacturing Index Summaries

PMI

Manufacturing expanded in May as the PMI® registered 54.9%, an increase of 0.1 percentage point from the April reading of 54.8%, indicating growth in manufacturing for the ninth consecutive month. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

A PMI above 43.3%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the May PMI® indicates growth for the 96th consecutive month in the overall economy and the ninth straight month of growth in the manufacturing sector. Fiore stated, "The past relationship between the PMI® and the overall economy indicates that the average PMI® for January through May (56.1%) corresponds to a 4.0% increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI® for May (54.9%) is annualized, it corresponds to a 3.7% increase in real GDP annually."

New Orders

ISM's New Orders Index registered 59.5% in May, which is an increase of 2 percentage points when compared to the 57.5% reported for April, indicating growth in new orders for the ninth consecutive month. New orders returned to the higher (near 60) levels since experienced in December 2016. A New Orders Index above 52.3%, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

Fourteen of 18 industries reported growth in new orders in May, listed in the following order: Paper Products; Primary Metals; Machinery; Nonmetallic Mineral Products; Chemical Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Furniture & Related Products; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Plastics & Rubber Products; Computer & Electronic Products; and Transportation Equipment. The only industry reporting a decrease in new orders in May compared to April is Apparel, Leather & Allied Products.

Production

ISM's Production Index registered 57.1% in May, which is a decrease of 1.5 percentage points when compared to the 58.6% reported for April, indicating growth in production for the ninth consecutive month. An index above 51.4%, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.

The 14 industries reporting growth in production during the month of May — listed in order — are: Plastics & Rubber Products; Nonmetallic Mineral Products; Primary Metals; Furniture & Related Products; Paper Products; Fabricated Metal Products; Printing & Related Support Activities; Chemical Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Machinery; Transportation Equipment; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The only industry reporting a decrease in production in May compared to April is Apparel, Leather & Allied Products.

Employment

ISM's Employment Index registered 53.5% in May, an increase of 1.5 percentage points when compared to the April reading of 52%, indicating growth in employment in May for the eighth consecutive month. Employment levels have been expanding since October 2016, and the search for qualified workers (as mentioned by multiple respondents) has become more difficult. An Employment Index above 50.5%, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

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

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in May, as the Supplier Deliveries Index registered 53.1%, which is 2 percentage points lower than the 55.1% reported for April. This is the 13th straight month of slowing supplier deliveries, indicating supply chains are adjusting to increased demand levels. A reading below 50% indicates faster deliveries, while a reading above 50% indicates slower deliveries.

The 11 industries reporting slower supplier deliveries in May — listed in order — are: Nonmetallic Mineral Products; Plastics & Rubber Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Computer & Electronic Products; Chemical Products; Fabricated Metal Products; Machinery; Food, Beverage & Tobacco Products; and Transportation Equipment. Six industries reported no change in supplier deliveries in May compared to April. No industries reported faster deliveries in May compared to April.

About Institute for Supply Management

Institute for Supply Management (ISM) serves supply management professionals in more than 90 countries. Its 50,000 members around the world manage about US$1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM leads the profession through the ISM Report On Business®, its highly regarded certification programs and the newly launched ISM Mastery Model®. This report has been issued by the association since 1931, except for a four-year interruption during World War II.