May 2018 Manufacturing PMI Up 1.4 to 58.7

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in May, and the overall economy grew for the 109th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee: “The May PMI® registered 58.7 percent, an increase of 1.4 percentage points from the April reading of 57.3 percent. The New Orders Index registered 63.7 percent, an increase of 2.5 percentage points from the April reading of 61.2 percent. The Production Index registered 61.5 percent, a 4.3 percentage point increase compared to the April reading of 57.2 percent. The Employment Index registered 56.3 percent, an increase of 2.1 percentage points from the April reading of 54.2 percent. The Supplier Deliveries Index registered 62 percent, a 0.9 percentage point increase from the April reading of 61.1 percent. The Inventories Index registered 50.2 percent, a decrease of 2.7 percentage points from the April reading of 52.9 percent. The Prices Index registered 79.5 percent in May, a 0.2 percentage point increase from the April reading of 79.3 percent, indicating higher raw materials prices for the 27th consecutive month.

“Comments from the panel reflect continued expanding business strength. Demand remains strong, with the New Orders Index at 60 or above for the 13th straight month, and the Customers’ Inventories Index remaining at very low levels. The Backlog of Orders Index continued expanding, with its highest reading since April 2004, when it registered 66.5 percent. Consumption, described as production and employment, continues to expand in spite of labor and skill shortages. Inputs, expressed as supplier deliveries, inventories and imports, had expansion declines, due primarily to inventory reductions likely caused by supplier performance issues. Lead-time extensions, steel and aluminum disruptions, supplier labor issues, and transportation difficulties continue. Export orders expanded at slower rates. The Prices Index is at its highest level since April 2011, when it registered 82.6 percent. Demand remains robust, but the nation’s employment resources and supply chains continue to struggle. Respondents say price pressure at their companies is causing price-increase discussions as we prepare to enter H2.”

Of the 18 manufacturing industries, 16 reported growth in May, in the following order: Textile Mills; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Fabricated Metal Products; Furniture & Related Products; Machinery; Chemical Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Petroleum & Coal Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Transportation Equipment; Paper Products; and Primary Metals. No industry reported a decrease in PMI® in May compared to April.

What respondents are saying…
  • “We are currently overselling our forecast and don’t see an end to the upswing in business. We are very concerned, however, about the tariffs proposed in Section 301 and are focusing on alternatives to Chinese sourcing.” (Transportation Equipment)
  • “Very difficult to hire skilled and unskilled labor.” (Food, Beverage & Tobacco Products)
  • “We are concerned about the strong dollar affecting our export orders as well as the steel tariffs, which are causing domestic steel prices to rise.” (Fabricated Metal Products)
  • “Strong demand from (agricultural) business; solid demand in all other business segments.” (Chemical Products)
  • “Sales remain strong. Lead times and direct material costs are soaring.” (Machinery)
  • “Suppliers are seeing price increases and trying to pass them on.” (Miscellaneous Manufacturing)
  • “Continued talk around steel tariffs has resulted in price increases for domestic line pipe, while HRC seems to be moving sideways. Temporary exemptions for allies and an agreement with South Korea have not calmed the market.” (Petroleum & Coal Products)
  • “Growth seems to be coming in the construction industry, but at a slower pace than expected with delays due to weather in the U.S. Business in (Latin America) is way up, and Canada is off to a decent start.” (Nonmetallic Mineral Products)
  • “Industry demand is causing price increases. Fuel prices are also on the rise, and there have been (price) increases associated with that.” (Primary Metals)
  • “Severe allocation, long lead times and upward price pressure, particularly in the electronic components market, continue to hamper our ability to meet customer demand and our shipping schedule.” (Computer & Electronic Products)

For more details, go to www.ism.ws