ISM Shows Unexpected Manufacturing Gain in May

The Institute for Supply Management (ISM) has released its index for manufacturing for the month of May. This reading rose to 51.3 from 50.8 in April. As a reminder, a reading above 50.0 indicates growth and a reading under 50.0 is contraction.

Dow Jones was calling for a consensus of only 50.3, and Bloomberg had its consensus at 50.5, with an Econoday range of 49.9 to 51.0. In short, this even managed to somehow exceed the most optimistic economist’s view. It was also the third month above the breakeven line, and the overall economy grew for the 84th consecutive month.

Several things may be helping out here. The pullback in the dollar, a gain in oil related demand and pricing, a recent boost in economic spending, demand from China, and more all come to mind.

Wednesday’s ISM report suggested that new orders and production were growing. However, employment and inventories were shown to be contracting, while supplier deliveries were viewed as being slower.

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Additional data from the commentary were listed as follows:

• The New Orders Index registered 55.7 percent, a decrease of 0.1 percentage point from the April reading of 55.8 percent.
• The Production Index registered 52.6 percent, 1.6 percentage points lower than the April reading of 54.2 percent.
• The Employment Index registered 49.2 percent, the same reading as in April.
• Inventories of raw materials registered 45 percent, a decrease of 0.5 percentage point from the April reading of 45.5 percent.
• The Prices Index registered 63.5 percent, an increase of 4.5 percentage points from the April reading of 59 percent, indicating higher raw materials prices for the third consecutive month.

Manufacturing registered growth in May for the third consecutive month. The ISM report showed that 14 of its 18 industries reported an increase in new orders in May, which is down from 15 in April, and that 12 of its 18 industries reported an increase in production in May, also down from 15 in April.

Of the 18 manufacturing industries, 12 reported growth in May. These were listed in the following order:

• Wood Products
• Textile Mills
• Printing & Related Support Activities
• Fabricated Metal Products
• Paper Products
• Plastics & Rubber Products
• Computer & Electronic Products
• Miscellaneous Manufacturing
• Electrical Equipment, Appliances & Components
• Food, Beverage & Tobacco Products
• Machinery
• Primary Metals

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The six industries reporting contraction in May were listed in the following order:

• Apparel, Leather & Allied Products
• Petroleum & Coal Products
• Transportation Equipment
• Nonmetallic Mineral Products
• Chemical Products
• Furniture & Related Products