NAPM report shows manufacturing growth moderating
The most recent “Report on Business” from the National Association of Purchasing Management (NAPM) showed economic activity in the nation’s manufacturing sector growing at a slower rate in May than in April. Nevertheless, the Purchasing Managers’ Index (PMI) has now been above the “50” mark that represents an expanding manufacturing sector for 22 consecutive months. The PMI fell to 51.4 in May from 52.9 in April. Still, of the 20 manufacturing industry sectors surveyed, 14 reported that conditions had improved over the month.
The NAPM monthly report also provides valuable information on supply and price conditions for major commodities purchased by manufacturers. Steel plate was the only commodity reported to be in short supply. Commodities with the longest running reports of price increases were corrugated containers, caustic soda, paper, and steel. A larger group of commodities was reported by purchasing managers to be lower in price in May than at the beginning of the year, including aluminum, copper, plastic resins, natural gas, methanol, and semiconductors.
In summary, the May NAPM “Report on Business” painted a picture of a healthy economy that is continuing to grow, but at a more moderate clip than the 4.8% gain in GDP registered over the first quarter of 1998.
Analysts at NAPM who study the historical relationship between PMI movements and trends in overall economic growth say that if the May PMI of 51.4 turned out to be the annual average for 1998, this would correspond to a 2.7% increase in real GDP — a number consistent with the expectation that most economists have for the U.S. economy over the balance of this year.