May Manufacturing Index Reflects Contraction

The sector contracted for the second consecutive month after a March increase.

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TEMPE, Ariz. — Economic activity in the manufacturing sector contracted in May for the second consecutive month and the 18th time in the last 19 months, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

The report was issued by Timothy R. Fiore, CPSM, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee:

"The Manufacturing PMI registered 48.7 percent in May, down 0.5 percentage point from the 49.2 percent recorded in April. The overall economy continued in expansion for the 49th month after one month of contraction in April 2020. (A Manufacturing PMI above 42.5 percent, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index remained in contraction territory, registering 45.4 percent, 3.7 percentage points lower than the 49.1 percent recorded in April. The May reading of the Production Index (50.2 percent) is 1.1 percentage points lower than April's figure of 51.3 percent. The Prices Index registered 57 percent, down 3.9 percentage points compared to the reading of 60.9 percent in April. The Backlog of Orders Index registered 42.4 percent, down 3 percentage points compared to the 45.4 percent recorded in April. The Employment Index registered 51.1 percent, up 2.5 percentage points from April's figure of 48.6 percent.

"The Supplier Deliveries Index figure of 48.9 percent equaled the reading recorded in April. (Supplier Deliveries is the only ISM Report On Business index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Inventories Index registered 47.9 percent, down 0.3 percentage point compared to April's reading of 48.2 percent.

"The New Export Orders Index reading of 50.6 percent is 1.9 percentage points higher than the 48.7 percent registered in April. The Imports Index continued in expansion territory, registering 51.1 percent, 0.8 percentage point lower than the 51.9 percent reported in April. During its current five-month streak in expansion, the Imports Index has averaged 51.8 percent."

"U.S. manufacturing activity continued in contraction after growing in March, the first expansion for the sector since September 2022. Demand was soft again, output was stable, and inputs stayed accommodative. Demand slowing was reflected by the (1) New Orders Index dropping deeper into contraction, supported by additional comments regarding 'softening,' (2) New Export Orders Index edging back into marginal expansion, (3) Backlog of Orders Index regressing lower into contraction territory, and (4) Customers' Inventories Index at the 'just right' level, neutral for future production. Output (measured by the Production and Employment indexes) advanced compared to April, with a combined 1.4-percentage point upward impact on the Manufacturing PMI calculation. Panelists' companies maintained production levels month over month, and head count reductions continued in May. Inputs â€” defined as supplier deliveries, inventories, prices and imports — continued to accommodate future demand growth. The Supplier Deliveries Index was stable, and the Inventories Index was marginally lower compared to April. The Prices Index eased but remained in strong expansion (or 'increasing') territory, as most commodity driven costs continue to climb but at weaker rates. Imports continued to grow, at a slower rate in May.

"Demand remains elusive as companies demonstrate an unwillingness to invest due to current monetary policy and other conditions. These investments include supplier order commitments, inventory building and capital expenditures. Production execution continued to expand but was essentially flat compared to the previous month. Suppliers continue to have capacity, with lead times improving and shortages not as severe. Fifty-five percent of manufacturing gross domestic product (GDP) contracted in May, up from 34 percent in April. More importantly, the share of sector GDP registering a composite PMI® calculation at or below 45 percent — a good barometer of overall manufacturing weakness — was 4 percent in May, the same as in April, but an indication of better health than the 27 percent recorded in January. Among the top six industries by contribution to manufacturing GDP in May, none had a PMI® at or below 45 percent."

The seven manufacturing industries reporting growth in May — in order — are: Printing & Related Support Activities; Petroleum & Coal Products; Paper Products; Textile Mills; Primary Metals; Fabricated Metal Products; and Chemical Products. The seven industries reporting contraction in May â€” in the following order — are: Wood Products; Plastics & Rubber Products; Machinery; Computer & Electronic Products; Furniture & Related Products; Transportation Equipment; and Food, Beverage & Tobacco Products.


  • "Seems like a minor slowdown is happening. With less spending in the economy, less pressure on us for our products." [Chemical Products]
  • "Business conditions are pacing with budget and forecast for 2024. Certain markets are soft, but others are ahead of forecast, allowing us to maintain overall. Concerns with the economy continue to drive business decisions." [Transportation Equipment]
  • "Volume continues to be challenging, mostly due to inflationary impacts." [Food, Beverage & Tobacco Products]
  • "Orders have started to rebound, but inventory levels remain high enough for no impact on our supplier orders. It will take a few more strong months before supplier orders are reactivated or increased." [Computer & Electronic Products]
  • "Backlog is dwindling as we get caught up on orders; new orders are not coming in as robust as the backlog is going down. Inflation continues to be a problem with pricing of raw material and interest rates. We expect a flat rest of calendar year 2024, especially given that it's a presidential election year." [Machinery]
  • "Export shipments continue to be soft as capital equipment sales remain lower than forecast. As a result, production is also trending lower and inventory that is not able to be pushed out is growing." [Fabricated Metal Products]
  • "Demand has been strong the first few months — ahead of budget, consistent with last year. Bookings are starting to slow down for May and June. We are monitoring this data closely to determine if it is a sign of decline or our typical cyclical demand." [Electrical Equipment, Appliances & Components]
  • "Business is picking up, with incoming bookings increasing." [Furniture & Related Products]
  • "Overall softening of markets for the month of June. Some impacts on a regional basis with the continued weather in the northeast, south and southeast regions. Delays in shipments continue across multiple regions." [Petroleum & Coal Products]
  • "General concern about overall industry economics. Pricing weakness continues, and we anticipate more headwinds in the coming months for spot orders and inflation. Contract order book remains steady." [Primary Metals]
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