May Manufacturing ISM Report On Businessﾮ

"May was a good month for manufacturing," said Norbert J. Ore, C.P.M., chair of the Institute for Supply Managementﾙ Manufacturing Business Survey Committee and group director, strategic sourcing and procurement, Georgia-Pacific Corporation. "The PMI strengthened as 16 industries saw improvement in new orders. This should help establish momentum in the sector that will carry forward into the third quarter."

ISM's Backlog of Orders Index indicates that order backlogs grew for the fourth consecutive month. ISM's Supplier Deliveries Index reflects slower deliveries for the fifth consecutive month. Manufacturing employment continued to decline in May as the index remained below the breakeven point (an index of 50 percent) for the 20th consecutive month. ISM's Prices Index is above 50 percent as manufacturers experienced higher prices for the third consecutive month. New Export Orders grew in May for the fifth consecutive month. May's Imports Index decelerated, while still registering growth for the sixth consecutive month.

Comments from purchasing and supply executives continue to vary greatly. An electronics industry respondent suggested the "economy is in search of its identity," while another said "some positive changes are coming into view." Metal fabricators report diverse comments as well, such as, "It appears the economy may be turning around" and "Sales are still relatively soft for the spring season. Adverse weather seems to be a factor."

ISM's PMI is 55.7 percent in May, an increase 1.8 percentage points from the 53.9 percent reported in April. ISM's New Orders Index rose from 59 percent in April to 63.1 percent in May. ISM's Production Index rose 0.5 percentage point from 58 percent in April to 58.5 percent in May. The ISM Employment Index is at 47.3 percent for May, an increase of 0.6 percentage point when compared to the 46.7 percent reported in April.

ISM's Supplier Deliveries Index registered 53.9 percent, compared to 53.7 percent in April. ISM's Inventories Index rose to 45.6 percent. ISM's Customer Inventories Index for May is at 39 percent, a slight decrease when compared to April's 40.5 percent, indicating less inventory in the supply chain. ISM's Prices Index in May is 63 percent, an increase of 2.7 percentage points from April's 60.3 percent. ISM's Backlog of Orders Index rose slightly from 56 percent in April to 56.5 percent in May.

ISM's New Export Orders Index registered 53.3 percent, up 1.4 percentage points from April's 51.9 percent. The rate of growth in imports slowed somewhat, as the Index declined from 55.7 percent in April to 53.6 percent in May.

"The growth in manufacturing activity continued and even gained some momentum during May. Some sectors are experiencing a faster recovery than others," added Ore. "May's PMI indicates the fourth consecutive month of significant growth. The pass-through of oil prices seems to have slowed. Energy is still a concern for many buyers. Primary Metals, Furniture, Transportation & Equipment, and Printing & Publishing are aggressively hiring at this time."

Of the 20 industries in the manufacturing sector, 18 industries reported growth: Petroleum; Textiles; Rubber & Plastic Products; Transportation & Equipment; Furniture; Glass, Stone & Aggregate; Instruments & Photographic Equipment; Primary Metals; Wood & Wood Products; Fabricated Metals; Electronic Components & Equipment; Tobacco; Paper; Chemicals; Printing & Publishing; Food; Industrial & Commercial Equipment & Computers; and Apparel.

"Steel is the only commodity reported in short supply. Commodities reported up in price are: Aluminum, High Density Polyethylene; Natural Gas, Paper, Plastic Film, Polyethylene, Resins, Steel, Steel - Cold Rolled, and Steel - Flat Rolled. The commodities reported down in price are: Caustic Soda, Corrugated Containers, and Packaging," Ore stated.