Institute for Supply Management Reports on May Manufacturing
The Institute for Supply Management (ISM) recently released its May Report on Business® for the U.S. Manufacturing sector, with the benchmark Purchasing Managers Index (PMITM) indicating contraction for only the second month since July 2009.
Each month, ISM publishes the PMITM, which is based on surveys of private-sector enterprises. While the index has been falling in recent months, it has managed to remain above the growth/contraction threshold of 50. In May, however, the PMITM fell 1.7 percentage points to register 49.0.
The overall economy, meanwhile, grew in May—its 48th consecutive month of expansion.
The monthly ISM assessment is based on benchmarks for new orders, production, employment, prices, and backlogs, among others. Just two of the 10 constituent indices—inventories (+2.5%) and customers’ inventories (+1.5%)—recorded increases in May.
Thankfully, the news out of the manufacturing sector wasn’t all bad; April factory orders rose a respectable 1%, and U.S. manufacturers’ seasonally adjusted after-tax profits for Q1 reached $152.5 billion, up $14.4 billion from the last quarter of 2012.
There was also more hopeful news on the macroeconomic front. Consumer confidence leapt 7.2% to 76.2%, and the economy at large added 175,000 jobs in May.
Of particular interest is the fact that consumer confidence—most likely driven by recent stock market gains and the return to growth in the housing market, among other factors—is out of step with both the ISM figure and falling commodity prices.
“Commodity prices generally rise and fall in direct proportion to overall economic activity,” says DVIRC Lead Researcher Sylvia Wower. “We see prices falling, even though economic performance here in the U.S. is still quite strong. It could be more a reflection on the challenges facing the global economy than a prediction of a domestic slowdown.”
Wower also pointed out that medical devices are a particularly bright area in terms of manufacturing.
“Recent demand for medical supplies indicates faster-than-expected growth in the medical industry. Changes in the healthcare system are driving demand for consumable medical devices, as are shorter average hospital stays and greater dependence on those consumables.”
Read the full ISM report here.