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Business of Engineering

Manufacturing index rises slightly in May from April

The purchasing manufacturers' index rose to 43.1% in May, but the general mood remains cautious and uncertain as COVID-19 continues to cause havoc on global supply chains.

By Chris Vavra June 1, 2020
Courtesy: CFE Media and Technology

The overall manufacturing economy improved slightly from April to May It had recorded growth for almost 11 straight years until last month say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

Timothy R. Fiore, CPSM, C.P.M., chair of the Institute for Supply Management (ISM) manufacturing business survey committee said in a press release: “The May PMI registered 43.1%, up 1.6 percentage points from the April reading of 41.5%. This figure indicates expansion in the overall economy after April’s contraction, which ended a period of 131 consecutive months of growth.” New orders and production reported increases compared to last month. So did employment, which is an encouraging sign given the general unemployment rate in the United States.

“Three months into the manufacturing disruption caused by the coronavirus (COVID-19) pandemic, comments from the panel were cautious (two cautious comments for every one optimistic comment) regarding the near-term outlook,” Fiore said. “As was the case in April, the PMI indicates a level of manufacturing-sector contraction not seen since April 2009; however, the trajectory improved.”

Even with this news, the road remains an uncertain one. “The coronavirus pandemic impacted all manufacturing sectors for the third straight month. May appears to be a transition month, as many panelists and their suppliers returned to work late in the month. However, demand remains uncertain, likely impacting inventories, customer inventories, employment, imports and backlog of orders,” Fiore said. Only a third of the 18 manufacturing industries reported growth in May whole 11 reported contraction.

What respondents are saying:

  • “Despite the COVID-19 issues, we are seeing an increase of quoting activity. This has not turned into orders yet, but it is a positive sign.” (Computer & electronic products)
  • “Current conditions in the automotive, construction, oil and gas, agriculture equipment, and tube/pipe markets are all adversely impacting our business results.” (Chemical products)
  • “We see an issue with suppliers that are affecting production. At the same time, social distancing measures in [the] manufacturing plant and customer demand are impacting the rate of production.” (Transportation equipment)
  • “Increased COVID-19 sales in the food business has really stressed our production capabilities.” (Food, beverage & tobacco products)
  • “Fuel sales demand are beginning to rebound in May as stay-at-home orders are lifted across the country.” (Petroleum & coal products)
  • “Returning to full production for automotive, ramp-up will still depend on speed of automotive start-ups. We have built up inventory to stock. Ready to ship.” (Fabricated metal products)
  • “Business activity remains strong for consumable applications and very weak in durable segments.” (Plastics & rubber products)
  • “We have been fortunate that most of our customer base is considered to be a part of the critical workforce, so we have been running at around 80 percent of our normal production volume.” (Primary metals)
  • “Getting out from under several suppliers being closed worldwide. Also, looking at what really needs to be in China.” (Machinery)
  • “We see a lot of positive signs, despite what’s going on. People seem to continue to be building and looking to projects for fall of 2020 and beyond. There is good optimism out there.” (Nonmetallic mineral products)

ISM explains, “A PMI reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. A PMI above 42.8 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 42.8 percent, it is generally declining. The distance from 50 percent or 42.8 percent is indicative of the extent of the expansion or decline.”

Edited by Chris Vavra, associate editor, Control Engineering, CFE Media and Technology, cvavra@cfemedia.com


Chris Vavra
Author Bio: Chris Vavra is an associate editor for CFE Media.