According to the latest Manufacturing ISM® Report On Business® from the nation’s supply executives, the manufacturing sector’s economic activity shrank in May for the seventh consecutive month after 28 months of gain. Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee, released the following study today:
The manufacturing PMI® for May showed a reading of 46.9 percent, 0.2 percentage points lower than the reading of 47.1 percent seen in April. This number represents the sixth month of recession for the total economy following a 30-month growth. At 42.6 percent, the New Orders Index stayed in contraction zone and was 3.1 points lower than the 45.7 percent number that was registered in April. The 51.1 percent reading on the Production Index is a2.2 percentage points higher than the 48.9 percent result from April. The Prices Index came in at 44.2 percent, a decrease of 9 percentage points from the 53.2 percent recorded in April. The Backlog of Orders Index recorded 37.5 percent, down 5.6 points from the figure of 43.1 percent in April. The Employment Index recorded 51.4 percent, up 1.2 percentage points from April’s figure of 50.2 percent, signalling yet another month of expansion. Its current reading of 43.5 percent, which is the lowest since March 2009 (43.2 percent), is 1.1 percentage points lower than the 44.6 percent reported in April. The Inventories Index decreased 0.5 percentage points from April’s value of 46.3 percent to 45.8 percent. A 50 percent reading on the New Export Orders Index indicatesCompared to April, the rate was 49.8%, an increase of 0.2 percentage points. The Imports Index was 47.3 percent, 2.6 percentage points less than the 49.9 percent reported in April, remaining in contraction zone.
Fiore goes on, The Manufacturing PMI® lost a little ground compared to the previous month, signalling a quicker rate of contraction, as the U.S. manufacturing sector shrank once more. The reading of the May composite index shows that businesses are still controlling outputs to better meet demand for the first half of 2023 and get ready for growth in the late summer/early autumn timeframe. But it’s apparent that business uncertainty increases in May. The New Orders Index shrank at a quicker rate, the New Export Orders Index improved marginally to 50%, and the Customers’ Inventories Index showed another decline in demand. Index remaining in the ‘too high’ region at the low end, which is bad for future production, and (4) the Backlog of Orders Index declining to a level not seen since the Great Recession. The Production and Employment indices both showed positive output/consumption, which had a combined positive influence on the Manufacturing PMI® estimate of 3.4 percentage points. After two months of contraction, the Employment Index increased for a second (and faster) month, while the Production Index returned to the expansion range. In terms of employment, the panellists’ remarks continue to show that their organisations are actively expanding and decreasing their headcounts, with opinions about when significant growth will resume being split. Future demand growth is still being accommodated by inputs, which are represented by supplier deliveries, stocks, prices, and imports. As panellists’ companies control their exposure to excess inventories, the Supplier Deliveries Index showed faster deliveries and the Inventories Index declined even lower. After one month of rising prices, the Prices Index abruptly and dramatically reverted to the ‘decreasing’ zone. The month saw a considerable improvement in manufacturing lead times.
Only one of the top six manufacturing sectors, transportation equipment, saw increase in May.The panellists’ concerns regarding the timing of the return of industrial recovery led to a further decline in new order rates. Comments from the panellists once more showed a 1-to-1 ratio between optimism for future growth and the persistence of short-term demand reductions. Reduced lead times for their companies’ more significant acquisitions are supported by panellists’ remarks and the statistics, indicating that supply networks are ready and eager for expansion. Future demand is unknown, and price instability persists. as businesses continue to reduce backlogs and past-due deliveries. The percentage of manufacturing GDP that is shrinking has increased from 73 percent in April to 76 percent. More industries saw substantial contractions as the percentage of manufacturing GDP with a composite PMI® calculation at or below 45 percent—a reliable indicator of manufacturing downturn overall—rose to 31 percent in May from 12 percent in April. Performance in May was unquestionably worse than in April, according to Fiore.
Nonmetallic Mineral Products, Furniture & Related Products, Transportation Equipment, and Fabricated Metal Products are the four manufacturing sectors that recorded increase in May. Wood Products, Primary Metals, Apparel, Leather & Allied Products, Textile Mills, Paper Products, and Printing are the 14 industries experiencing contraction in May, in that order. Petroleum, coal, chemical, food, beverage, and tobacco products; electrical equipment, appliances, and components; plastics and rubber products; miscellaneous manufacturing; and machinery.
WHAT PERSONS ARE SAYING IN REPLY
“Our company’s overall influence is variable. While services and consumables continue to be on pace and even grow in some areas, our scientific instrumentation business is still being negatively impacted by financing to finance capital purchases. In reaction to ongoing global inflation uncertainty and upheaval in Europe, hiring has stalled. [Products for Computers & Electronics]
Due to new business pipelines finally producing billable work, demand is continuing to increase. The drivers are home and personal care. [Products Chemicals]
“Our backlog of customer orders is still substantial, but the rate of new orders is declining. On-time delivery from our sourceWe are still having difficulty with delivery, and prices are rising every week. The labour situation is improving both inside our company and throughout our supply chain. [Materials for Transportation]
“As customers and consumers start to push back, pricing appears to be taking centre stage for supply and sourcing teams. High food prices continue in most categories, despite some discretionary commodities seeing a decline in inflation. [Products of Food, Beverage, and Tobacco]
The economy has recovered to pre-pandemic levels. Demand is rising in the business and government sectors while falling in the residential and consumer sectors. [Machinery]
“Customer demand is less volatile one month to six months in advance; we are beginning to see signals of slowing in the second half of 2023 and possibly into early 2024. Transportation, especially from the EastWhile transit durations in Asia are still below historical averages, they are still above average in Europe and India. Only a small number of commodities are subject to supply shortages. Despite being too late, suppliers are still demanding price rises. Made-to-Order Metal Products
“Sales are soft, not catastrophic, despite being slightly lower, but they are holding at the current rate.” Furniture and associated goods
“Moderate increase in customer orders/demand, improving supplier deliveries, and stable to soft raw material prices.” [Products of Plastics and Rubber]
“Business is booming, demand is still high, and we are ramping up production to keep up.” Unspecified Manufacturing
“A slowdown is evident, but industrial and high-tech demands are pushing out. When compared to initial projections of 2023 demand, this is currently slowing growth and making that year’s demand look flat to barely up. 10-percent growth.” [Electrical Equipment, Appliances & Components]
