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Manufacturing Contracts in May While Some Optimism Seen

Bill Koenig
By Bill Koenig Senior Editor, SME Media

Manufacturing contracted again in May but there were signs of improvement, the Institute for Supply Management said today in a monthly report.

The Tempe, Ariz.-based group’s manufacturing index, known as the PMI, registered at 43.1 percent last month. That was better than April’s 41.5 percent, reflecting the impact of the novel coronavirus (COVID-19).

“We are at the bottom of the toboggan run,” Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call.

The May PMI also reflected a general improvement in the economy, Fiore said.

“It’s not going to be a great year,” he added. “There is definitely a feeling there is going to be a recovery.”

Factories in the auto and aerospace industries that had shut down because of COVID-19 began to reopen last month. Detroit automakers General Motors Co., Ford Motor Co. and FCA US LLC reported additional COVID-19 cases among plant workers. Ford briefly paused the restart of some plants because of such cases.

ISM said new orders, production and employment showed signs of getting better but still were in economic contraction.

The PMI is based on a survey of 350 manufacturing supply executives in 18 industries. The index is considered a leading economic indicator and a barometer of where the economy is headed. A PMI below 50 percent indicates a shrinking manufacturing economy, while above 50 percent shows expansion.

The PMI has registered contraction in eight of the past 12 months. The 12-month average for the index is 48.3 percent. COVID-19’s impact on the economy began to be felt in the second half of March.

In May, six industries reported economic growth, including non-metallic mineral products, furniture and apparel. Eleven reported economic contraction, including primary metals, transportation equipment, fabricated metal products and machinery.

Also last month, the group’s New Orders Index improved to 31.8 percent from 27.1 percent in April. Four industries said they had increases in orders while 12 reported order decreases.

The Production Index rose to 33.2 percent in May, up from 27.5 percent the month before. Four industries reported production increases while 11 said output fell.

ISM’s Employment Index gained to 32.1 percent last month from 27.5 percent in April. Two industries reported job gains while 16 reported job cuts.

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