PMI rebounds to 52.8% in May
The Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) for May climbed 1.3 percentage points to 52.8% as industry experts saw signs of strengthening in the manufacturing sector. It is the first time the index has shown positive growth since October 2014.
The index had fallen to a 12-month low of 51.5% in both March and April, but members of the ISM’s Manufacturing Business Survey Committee saw a stronger overall economy emerging in May.
"Comments from the panel carry a positive tone in terms of an improving economy, increasing demand, and improving flow of goods through the West Coast ports," said committee chairman Bradley Holcomb. "Also noted, however, are continuing concerns over the price of the U.S. dollar and challenges affecting markets related to oil and gas industries."
All the indices supporting the PMI were up significantly in May. The New Orders Index rose 2.3 percentage points to 55.8%, the Production Index climbed 1.5 percentage points to 54.5% and the Employment Index climbed back above the 50% growth barrier, rising 3.4 percentage points to 51.7%.
Committee members expressed concern over the strong U.S. dollar and its impact on global trade. Among the comments:
- "Economy is showing signs of improvement." (Food, Beverage & Tobacco Products)
- "Automotive is still strong. However, steel prices have dropped due to overcapacity and the strong U.S. dollar." (Fabricated Metal Products)
- "Overall business is steady. Employment in this area is up, a good sign." (Transportation Equipment)
- "The exchange rate on the dollar is hurting our sales in Asia. The conversion rate is lowering our profit in Europe where we sell in Euros." (Computer & Electronic Products)
- "Continued challenges in markets related to oil and gas industries." (Miscellaneous Manufacturing)
- "Oversupply is continuing to tighten profit margins." (Wood Products)
- "West Coast port issues have eased up and our incoming imports are flowing again." (Machinery)
The PMI reached a milestone in May as well. The Index marked six consecutive years above the economic growth level of 43.1%. The overall manufacturing sector growth level of 50% was reached for the 29th straight month.