Manufacturing expansion accelerated slightly in May, the Institute for Supply Management said today.
The Tempe, Ariz.-based group’s manufacturing index, known as the PMI, rose to 56.1 percent last month, up from 55.4 percent in April.
The index is based on a survey of supply executives in 18 industries. An index level above 50 percent indicates an expanding manufacturing economy, below 50 percent reflects contraction. May marked the 24th consecutive month in positive territory.
Manufacturing remains “in a demand-driven, constrained expansion,” Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call.
Fifteen industries reported economic expansion in May, including machinery, transportation equipment, petroleum & coal products, fabricated metal products and miscellaneous manufacturing. Only one industry, furniture, reported a decrease in economic activity.
The PMI was above 60 percent in some months during 2021. The index has slowed somewhat since, averaging 58.8 percent the past 12 months. April’s 55.4 percent PMI was the lowest during that period.
The institute’s New Orders Index improved to 55.1 percent in May from 53.5 percent the month before. Fiore said orders remained strong in the U.S. while there were “weak export orders.”
“China is not up and running yet” following renewed COVID-19 lockdowns, he added. “Europe is kind of frozen.” Eleven of 18 industries reported increases in new orders while six had no changes in orders.
ISM’s Production Index edged up to 54.2 percent last month from 53.6 percent in April. Eight industries reported gains in output while eight indicated a decrease.
The group’s Employment Index slipped in May to 49.6 percent last month from 50.9 percent the month before. Eight industries reported adding jobs while seven reported a decrease in employment.
The Employment Index reflected difficulty in hiring, Fiore said.
“There is not that much labor out there,” he said. “It’s going to be a slow slog. We can’t hire enough.”
The PMI is considered a leading economic indicator and a barometer of where manufacturing is headed.
Manufacturing has been dealing with supply chain issues. In addition, the Federal Reserve is raising interest rates amid high inflation rates.
“There is a lot of uncertainty,” said Richard Kilgore, instructor in the Online Management and Business Administration program at Maryville University. “Inflation is causing the Federal Reserve to slow down the economy.”
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