ISM Report: Manufacturing’s streak rolls on at a slower pace
Sector still expanding, but rate drops off April’s high point
Manufacturing’s three-year growth streak continued in May, albeit at a slower pace than in April, according to the latest Institute for Supply Management manufacturing report.
The manufacturing sector expanded for the 34th straight month and the nation’s overall economy hit the three-year mark in growth, according to the report, issued by the ISM’s Manufacturing Business Survey Committee.
“The PMI registered 53.5% a modest decrease of 1.3 percentage points from April's reading of 54.8% indicating expansion in the manufacturing sector for the 34th consecutive month,” said committee chair Bradley J. Holcomb, CPSM, CPSD. “The New Orders Index continued its growth trend for the 37th consecutive month, registering 60.1% in May. This represents an increase of 1.9 percentage points from April and also the highest level recorded by the index since April 2011.” A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.
“The Prices Index for raw materials fell to 47.5% in May, dropping 13.5 percentage points from April, indicating lower prices for the first time since December 2011,” Holcomb added. “Comments from the panel generally reflect stable-to-strong orders, with sales showing steady improvement over the first five months of 2012.”
Despite a slowing in jobs growth in May, comments from survey participants were generally bullish. “Business has been trending moderately higher since the beginning of the year,” said one chemical products manufacturer. “(We) anticipate 5% to 7% growth for the year.”
“Sales were stronger than expected; customers are waiting until the last minute to place orders,” added a machinery manufacturer.
“We are having the best year in sales volume and profit since mid-2008,” said a fabricated metal products manufacturer.
A PMI in excess of 42.6% over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 36th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 34th consecutive month. “The past relationship between the PMI and the overall economy indicates that the average PMI for January through May (53.6%) corresponds to a 3.7% increase in real gross domestic product,” said Holcomb. “In addition, if the PMI for May (53.5%) is annualized, it also corresponds to a 3.7% increase in real GDP annually.”
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