May Manufacturing ISM; PMI at 52.8%

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Economic activity in the manufacturing sector expanded in May for the 29th consecutive month, and the overall economy grew for the 72nd consecutive month, say the nation's supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. "The May PMI® registered 52.8 percent, an increase of 1.3 percentage points over the April reading of 51.5 percent. The New Orders Index registered 55.8 percent, an increase of 2.3 percentage points from the reading of 53.5 percent in April. The Production Index registered 54.5 percent, 1.5 percentage points below the April reading of 56 percent. The Employment Index registered 51.7 percent, 3.4 percentage points above the April reading of 48.3 percent, reflecting growing employment levels from April. Inventories of raw materials registered 51.5 percent, an increase of 2 percentage points from the April reading of 49.5 percent. The Prices Index registered 49.5 percent, 9 percentage points above the April reading of 40.5 percent, indicating lower raw materials prices for the seventh consecutive month. Comments from the panel carry a positive tone in terms of an improving economy, increasing demand, and improving flow of goods through the West Coast ports. Also noted; however, are continuing concerns over the price of the US dollar and challenges affecting markets related to oil and gas industries."

Of the 18 manufacturing industries, 14 are reporting growth in May in the following order: Apparel, Leather & Allied Products; Furniture & Related Products; Paper Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Primary Metals; Transportation Equipment; Printing & Related Support Activities; Fabricated Metal Products; Machinery; Miscellaneous Manufacturing; and Chemical Products. The two industries reporting contraction in May are: Textile Mills; and Computer & Electronic Products.

MAY 2015 MANUFACTURING INDEX SUMMARIES

PMI®

Manufacturing expanded in May as the PMI® registered 52.8 percent, an increase of 1.3 percentage points over the April reading of 51.5 percent, indicating growth in manufacturing for the 29th consecutive month. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI® in excess of 43.1 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the May PMI® indicates growth for the 72nd consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 29th consecutive month. Holcomb stated, "The past relationship between the PMI® and the overall economy indicates that the average PMI® for January through May (52.4 percent) corresponds to a 2.9 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI® for May (52.8 percent) is annualized, it corresponds to a 3 percent increase in real GDP annually."

New Orders

ISM®'s New Orders Index registered 55.8 percent in May, an increase of 2.3 percentage points when compared to the April reading of 53.5 percent, indicating growth in new orders for the 30th consecutive month. A New Orders Index above 52.1 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

The 11 industries reporting growth in new orders in May — listed in order — are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Furniture & Related Products; Paper Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Machinery; Primary Metals; Transportation Equipment; Miscellaneous Manufacturing; and Chemical Products. The only industry reporting a decrease in new orders during May is Petroleum & Coal Products. Six industries reported no change in new orders in May compared to April.

Production

ISM®'s Production Index registered 54.5 percent in May, which is a decrease of 1.5 percentage points when compared to the 56 percent reported in April, indicating growth in production for the 33rd consecutive month. An index above 51.1 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.

The 11 industries reporting growth in production during the month of May — listed in order — are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Paper Products; Primary Metals; Transportation Equipment; Machinery; Furniture & Related Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Fabricated Metal Products; and Chemical Products. The only industry reporting a decrease in production during May is Computer & Electronic Products. Six industries reported no change in production in May compared to April.

Employment

ISM®'s Employment Index registered 51.7 percent in May, which is an increase of 3.4 percentage points when compared to the 48.3 percent reported in April, and indicates a return to growth in employment following only one month of contraction in the past 24 months. An Employment Index above 50.6 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Of the 18 manufacturing industries, in May, 14 industries reported employment growth in the following order: Textile Mills; Printing & Related Support Activities; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Machinery; Plastics & Rubber Products; Primary Metals; Paper Products; Miscellaneous Manufacturing; Chemical Products; and Transportation Equipment. The only industry reporting a decrease in employment in May is Computer & Electronic Products.

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations slowed in May at a faster rate as the Supplier Deliveries Index registered 50.7 percent. This month's reading is 0.6 percentage point higher than the 50.1 percent reported in April. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

The six industries reporting slower supplier deliveries in May — listed in order — are: Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Paper Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Transportation Equipment. The five industries reporting faster supplier deliveries during May are: Machinery; Miscellaneous Manufacturing; Chemical Products; Computer & Electronic Products; and Primary Metals. Seven industries reported no change in supplier deliveries in May compared to April.

Inventories*

The Inventories Index registered 51.5 percent in May, which is 2 percentage points higher than the 49.5 percent registered in April, indicating raw materials inventories are growing in May following a month of contraction in inventories in April. An Inventories Index greater than 42.9 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

The seven industries reporting higher inventories in May — listed in order — are: Electrical Equipment, Appliances & Components; Furniture & Related Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Primary Metals; Chemical Products; and Computer & Electronic Products. The four industries reporting lower inventories in May are: Textile Mills; Nonmetallic Mineral Products; Fabricated Metal Products; and Food, Beverage & Tobacco Products. Seven industries reported no change in inventories in May compared to April.

Customers' Inventories*

ISM®'s Customers' Inventories Index registered 45.5 percent in May, an increase of 1.5 percentage points from April when customers' inventories registered 44 percent. May's reading indicates that customers' inventories are considered to be too low, but higher than in April.

The two manufacturing industries reporting customers' inventories as being too high during the month of May are: Fabricated Metal Products; and Paper Products. The 10 industries reporting customers' inventories as too low during May — listed in order — are: Petroleum & Coal Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Machinery; Primary Metals; Transportation Equipment; Miscellaneous Manufacturing; Chemical Products; Computer & Electronic Products; and Food, Beverage & Tobacco Products.

Prices*

The ISM® Prices Index registered 49.5 percent in May, an increase of 9 percentage points when compared to the April reading of 40.5 percent, indicating a decrease in raw materials prices for the seventh consecutive month. In May, 15 percent of respondents reported paying higher prices, 16 percent reported paying lower prices, and 69 percent of supply executives reported paying the same prices as in April. A Prices Index above 52.1 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.

Of the 18 manufacturing industries, the five industries reporting paying increased prices for their raw materials in May are: Plastics & Rubber Products; Primary Metals; Computer & Electronic Products; Paper Products; and Miscellaneous Manufacturing. The seven industries reporting paying lower prices during the month of May — listed in order — are: Wood Products; Petroleum & Coal Products; Fabricated Metal Products; Furniture & Related Products; Machinery; Transportation Equipment; and Chemical Products. Six industries reported no change in prices in May compared to April.

About This Report

The data presented herein is obtained from a survey of manufacturing supply managers based on information they have collected within their respective organizations. ISM® makes no representation, other than that stated within this release, regarding the individual company data collection procedures. The data should be compared to all other economic data sources when used in decision-making.