PMI tops 52% in May

Source: Manufacturing ISM Report on Business

By Nancy Bartels

Jun 04, 2015

According to the latest Manufacturing ISM Report on Business, economic activity in the manufacturing sector expanded in May for the 29th consecutive month, and the overall economy grew for the 72nd consecutive month.

"The May PMI registered 52.8% percent, an increase of 1.3% percentage points over the April reading,” said Bradley J. Holcomb, CPSM, CPSD, chairman of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee. “The New Orders Index registered 55.8%, an increase of 2.3% from April. The Production Index registered 54.5%, down 1.5%. The Employment Index was up 3.4% at 51.7% percent, reflecting growing employment levels. Inventories of raw materials registered 51.5%, up 2%. The Prices Index registered 49.5%, a full 9% above the April reading of 40.5%, indicating lower raw materials prices for the seventh consecutive month.”

Holcomb went on to say that comments from the committee carried “a positive tone in terms of an improving economy, increasing demand and improving flow of goods through the West Coast ports.” However, the panel noted that there are continuing concerns over the price of the U.S. dollar and challenges affecting markets related to oil and gas industries.

Of the 18 manufacturing industries measured in the survey, 14 are reporting growth in May in the following order: apparel, leather & allied Products; furniture & related products; paper products; food, beverage & tobacco Products; nonmetallic mineral products; plastics & rubber products; electrical equipment, appliances & components; primary metals; transportation equipment; printing & related support activities; fabricated metal products; machinery; miscellaneous manufacturing; and chemical products. The two industries reporting contraction in May are textile mills; and computer & electronic products.

A reading above 50% in the PMI Index indicates that the manufacturing economy is generally expanding; below 50% that it is generally contracting. Furthermore, A PMI in excess of 43.1% over a period of time generally indicates an expansion of the overall economy. Therefore, the May PMI indicates growth for the 72nd consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 29th consecutive month. Holcomb said, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through May (52.4%) corresponds to a 2.9% increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI for May (52.8%) is annualized, it corresponds to a 3% increase in real GDP annually."

For the complete report, go to https://www.instituteforsupplymanagement.org/ismreport/mfgrob.cfm

PMI graph