May PMI ticks up slightly as manufacturing remains solid
U.S. manufacturing continued its resurgence in 2017 as the purchasing manufacturers’ index (PMI) rose slightly in May to 54.9%. The increase of 0.1 percentage points ended a two-month decline and signaled that the manufacturing sector remains on solid ground. The PMI has been above the 50% growth threshold for 11 of the last 12 months, and has not dipped below 54% since November 2016.
"Comments from the panel generally reflect stable to growing business conditions, with new orders, employment and inventories of raw materials all growing in May compared to April," said Bradley Holcomb, chairman of the Manufacturing Business Survey Committee for the Institute for Supply Management (ISM), which publishes the monthly PMI index. "The slowing of pricing pressure, especially in basic commodities, should have a positive impact on margins and buying policies as this moderation moves up the value chain."
In May, 15 of the 18 industries surveyed showed growth in May. Committee members cited stable global and domestic business as the reason manufacturing optimism remains high. Among the committee comments:
- "Sales have picked up compared to the last two months. Customer demand has increased." (Plastics & Rubber Products)
- "Economy is still strong, but (the) political climate can change things very quickly." (Transportation Equipment)
- "Global price increases for commodities." (Electrical Equipment, Appliances & Components)
- "Business (sales/production) is steady. Pricing pressures on raw materials. Skilled labor in short supply." (Furniture & Related Products)
- "Our business is definitely paying attention to developments with the Canadian lumber tariff announcement. The final outcome could change our fiber pricing." (Paper Products)
- "Business conditions are steady, and with competition increasing, it’s making negotiations even more intense to reduce costs." (Machinery)
- "Business is booming, and getting direct employees is increasingly difficult." (Fabricated Metal Products)
- "Difficult to find qualified labor for factory positions." (Food, Beverage & Tobacco Products)
May marked another milestone for the index. It has now been eight years since the index registered a reading below 43.3%, which is the index’s threshold to indicate growth in the overall economy. The May PMI figure translates to an annual growth rate of 3.7% in domestic gross products, according to ISM officials.