U.S. Manufacturing Sector: Up and Growing

U.S. Manufacturing SectorOn Monday, June 1, 2015, the Institute for Supply Management (ISM) reported on economic activity for the U.S. manufacturing sector. In May, new orders, production, employment, and inventories grew, while supplier deliveries slowed. (Source: Institute for Supply Management, May 1, 2015.)

According to the report, economic activities in the manufacturing sector expanded in May for the 29th consecutive month, and the overall economy grew for the 72nd consecutive month.

The ISM’s factory index rose to 52.8%, an increase of 1.3% from 51.5% in April. A reading above 50% indicates that the manufacturing economy is generally expanding; while below 50% indicates that it is generally contracting.

The New Orders Index climbed to 55.8 %, an increase of 2.3% from April’s 53.5%. Over time, a new orders index above 52.1% is generally consistent with an increase in the Census Bureau’s series on manufacturing orders. Petroleum and coal products were the only industry to report a decrease.

The production index edged lower to 54.5 % in May, which is a decrease of 1.5% when compared to the 56% reported in April. Computer and electronic products was the only industry that reported a decrease in production during May.

The Employment Index rose to 51.7% in May, which is an increase of 3.4% when compared to the 48.3% reported in April. This indicates a return to growth in employment, following only one month of contraction in the past 24 months. The computer and electronic industry was the only industry to report a decline in employment. Over time, an employment index above 50.6% is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

The Inventories Index stood at 51.5% in May, which is two percent higher than 49.5% in April. Over time, an Inventories Index higher than 42.9% is generally consistent with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories. Textile mills; nonmetallic mineral products; fabricated metal products; and food, beverage, and tobacco products reported a decline compared to the previous month.

The Supplier Deliveries Index registered at 50.7% in May, a faster rate compared to previous months. A reading below 50% indicates faster deliveries, while a reading above 50% indicates slower deliveries. Electrical equipment, appliances and components; plastics and rubber products; paper products; food, beverage, and tobacco products; fabricated metal products; and transportation equipment reported a slower supplier’s delivery in May.