May 2019 Manufacturing ISM Report On Business Shows Continued Manufacturing Expansion, but Backlog Contracting

By Steve Clouther

Industry Trends

The Manufacturing ISM Report On Business is published monthly by the Institute for Supply Management (ISM), the largest supply management organization in the world, as well as one of the most respected.  Economic activity in the manufacturing sector expanded in May, and the overall economy grew for the 121st consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

Manufacturing expanded in May, as the PMI registered 52.1 percent, a decrease of 0.7 percentage point from the April reading of 52.8 percent.  This is the lowest reading since October 2016, when the index registered 51.7 percent.  This indicates growth in manufacturing for the 33rd consecutive month.

ISM’s New Orders Index registered 52.7 percent in May, which is an increase of 1 percentage point when compared to the 51.7 percent reported for April, indicating growth in new orders for the 41st consecutive month.

ISM’s Production Index registered 51.3 percent in May, which is a decrease of 1 percentage point when compared to the 52.3 percent reported for April, indicating growth in production for the 33rd consecutive month.

ISM’s Employment Index registered 53.7 percent in May, an increase of 1.3 percentage points when compared to the April reading of 52.4 percent. This indicates growth in employment in May for the 32nd consecutive month.

The delivery performance of suppliers to manufacturing organizations slowed in May, as the Supplier Deliveries Index registered 52 percent.  This is 2.6 percentage points lower than the 54.6 percent reported for April and is the 39th straight month of slowing supplier deliveries

The Inventories Index registered 50.9 percent in May, a decrease of 2 percentage points from the 52.9 percent reported for April, and the index expanded for the 17th consecutive month but neared contraction levels compared to the previous month.

ISM’s Backlog of Orders Index registered 47.2 percent in May, which is 6.7 percentage points lower than the 53.9 percent reported in April, indicating order backlogs contracted for the month.  Backlogs shrank during May, due to production output being able to exceed new order intake rates.  Backlogs recorded their lowest level of performance since October 2016.

Of the 18 manufacturing industries, 11 reported growth in May, in the following order: Printing & Related Support Activities; Furniture & Related Products; Plastics & Rubber Products; Textile Mills; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Chemical Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; and Machinery.  The six industries reporting contraction in May — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Petroleum & Coal Products; Wood Products; Paper Products; and Fabricated Metal Products.

Respondents expressed concern with the escalation in the U.S.-China trade standoff, but overall sentiment remained predominantly positive.  The PMI continues to reflect slowing expansion.

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