U.S. ISM Factory Index Falls in May
by:Tom Moeller
|in:Economy in Brief
Summary
- Reading is below expansion level for third straight month.
- Inventories account for all of m/m weakening.
- Prices index remains near three-year high.
The ISM Purchasing Managers Index of activity in the manufacturing sector eased to 48.5 in May from 48.7 during April and from 49.0 in March. The index was below the recent high of 50.9 in January, but stood above a low of 46.9 in October of last year. A level of 50 is the break-even point between a rising and falling level of activity. The Action Economics Forecast Survey expected a reading of 49.3 for May. The series reached a monthly high of 63.8 in March 2021.
Of the five component indexes, only one deteriorated m/m. The May inventory index fell to 46.7 from 50.8 in April. Sixteen percent (NSA) of respondents reported higher inventories while 21.2% reported them lower. Offsetting this decline, the production series rose to 45.4 after falling to 44.0 in April. A fairly steady 19.1% (NSA) of respondents reported higher production while an increased 24.6% reported lower output. The new orders index improved to 47.6 last month from 47.2 in April. The index remained up from a low of 45.2 in March. Twenty-five percent of respondents reported higher new orders while 26.9% reported lower orders. The supplier delivery index rose to 56.1 last month from 55.2 in April. Nineteen percent (NSA) of respondents indicated slower product delivery speeds while 7.0% reported faster speeds.
Also moving higher, the employment reading rose to 46.8 last month from 46.5 in April. The figure has been trending lower since a high of 57.8 in March 2021, and remained below a recent January high of 50.3. Fourteen percent (NSA) of respondents reported higher new employment while 17.7% reported a decline.
The prices index, which is not part of the composite series, eased to 69.4 (NSA) in May and reversed its increase to 69.8 in April. It remained up from a low of from a December 2022 low of 39.4. A lessened 45.1% (NSA) of respondents reported higher prices last month, up from 12.2% in November, while a lessened 6.4% reported lower prices.
In other series, the export orders reading plunged to 40.1 in May from 43.1 during April. It was down from its high of 52.4 in January. The imports index also fell sharply to 39.9 from 47.1 in April. It was the lowest reading since April 2009. The order backlog reading rose to 47.1 (NSA) last month from 43.7 in April. It was well above a low of 37.5 in May 2023.
The ISM figures are based on responses from over 400 purchasing executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These indexes are diffusion indexes where a reading above 50 indicates expansion and a reading below 50 points to contraction. The figures from the Institute for Supply Management can be found in Haver’s USECON database; further detail is found in the SURVEYS database. The expectations number is available in Haver’s AS1REPNA database.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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