The 2020 Mid-Year Economic Update_long

Manufacturing Contracts in May

Manufacturing failed to grow in May, according to the nation's supply executives in the latest Manufacturing ISM Report On Business.


According to the report, the manufacturing sector failed to grow in May as the PMI fell below 50% for the fourth consecutive month.

In relative terms, May was down slightly from April as the rate of contraction in manufacturing slowed. The Production Index was a bright spot as it moved above 50% after declining for two months.

Manufacturers find themselves caught between rising costs and weakening demand in many industries. Exports continue strong due to the weak dollar — without the weak dollar the story would be much more negative in manufacturing.


Daniel Meckstroth, chief economist for the ...

Manufacturing failed to grow in May, according to the nation’s supply executives in the latest Manufacturing ISM Report On Business.

According to the report, the manufacturing sector failed to grow in May as the PMI fell below 50% for the fourth consecutive month.

In relative terms, May was down slightly from April as the rate of contraction in manufacturing slowed. The Production Index was a bright spot as it moved above 50% after declining for two months.

Manufacturers find themselves caught between rising costs and weakening demand in many industries. Exports continue strong due to the weak dollar — without the weak dollar the story would be much more negative in manufacturing.

Daniel Meckstroth, chief economist for the Manufacturers Alliance/MAPI, said the decline in industrial activity was marginal. “There was, however, some positive momentum from working off the backlog of orders and strengthening exports. In fact the ISM production indicator suggests that factory output actually increased slightly in the last month. The substantial decline in the value of the dollar is acting as a counterweight to the depressed situation in the U.S. housing, motor vehicle and consumer product markets.
 
“An unfortunate consequence of the falling dollar and concurrent strong growth in developing countries, though, is that commodity prices are skyrocketing. It is increasingly difficult to pass on commodity cost increases in a generally weak U.S. economy, and this dynamic will lead to shrinking profit margins.”

Full report here.

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