May PMIs Indicate Moderating Business Conditions in U.S. Manufacturing

The U.S. manufacturing Purchasing Managers’ Index from IHS Markit slipped to an eight-month low in May, revealing a loss of momentum from the peak seen at the beginning of 2017. There was moderate improvement in business conditions, alongside subdued increases in output and employment. May data also indicated more cautious inventory policies.

“Manufacturing growth momentum continued to ebb in May, down to its weakest since just before the presidential election,” said Chris Williamson, chief business economist at IHS Markit. “Manufacturing output, order books and employment all grew at only modest rates as sluggish sales prompted firms to scale back hiring. Exports sales remained especially lackluster, hampered in part by the relatively strong dollar.”

At a reading of 52.7, the seasonally adjusted index was down just a fraction from April. Data indicated that manufacturing output increased for the 12th month running, Markit said. New order levels increased, but the rate of expansion was the least since September 2016. The survey also showed a decline in the backlogs of work for the first time since May of last year. Manufacturing firms said that sustained hiring helped alleviate pressures on capacity. Input price inflation eased sharply from the two-and-a-half-year peak seen in April, Markit said.

The May manufacturing Report on Business from the Institute for Supply Management (ISM) showed economic activity in the sector expanding, with the overall economy growing for the 96th consecutive month.

“Comments from the panel generally reflect stable to growing business conditions, with new orders, employment and inventories of raw materials all growing in May compared to April,” said Timothy R. Fiore, chair of the ISM manufacturing business survey committee. “The slowing of pricing pressure, especially in basic commodities, should have a positive impact on margins and buying policies as this moderation moves up the value chain.”

The top manufacturing industries reporting growth in May include nonmetallic mineral products, furniture and related products, plastics and rubber products, machinery and primary metals.

– Adam Fusco, associate editor

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