June 1, 2017

Manufacturing Indices: Mixed Bag, But Expanding

Filed under: Economy — Tom @ 11:54 am

The Institute for Supply Management’s Manufacturing Index rose slightly in May to 54.9 percent from 54.8 percent. (Any value above 50 percent means expansion.)

Production and New Orders remained in the high-50s. Backlog of Orders came in at 55.0 percent, down 2 points from April, but still well above what was typically seen during the past decade. 15 of 18 industries were in expansion.

Meanwhile, the “Manufacturing PMI” from IHS Markit Economics fell to 52.7 percent, its lowest level in eight months only 0.1 points below April, as “Weaker new business growth and softer job creation helped to offset a marginally stronger upturn in production volumes.” Further:

Commenting on the final PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“Manufacturing growth momentum continued to ebb in May, down to its weakest since just before the presidential election.

“Manufacturing output, order books and employment all grew at only modest rates as sluggish sales prompted firms to scale back hiring. Exports sales remained especially lackluster, hampered in part by the relatively strong dollar. The survey also brought signs of companies becoming more cautious about holding inventory.

“Factories’ raw material prices meanwhile rose at a sharply reduced rate, which should at least help take pressure off profit margins and also feed through to weaker pressure on consumer price inflation.”

Overall, manufacturing is still in reasonably strong expansion, at a level I believe is more closely reflected in Markit’s value than ISM’s.

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