Manufacturing remains on growth path in May, ISM reports
Manufacturing activity for the month of May remained on a strong growth path, according to data released today by the Institute for Supply Management (ISM).
In its Monthly Manufacturing Report, the ISM said the report’s key metric, the PMI, at 61.2 (a reading of 50 or higher indicates growth), saw a 0.5% increase, d April to May. It was the twelfth consecutive month of growth in the PMI index, coupled with May also representing the twelfth consecutive month of growth for the economy as a whole. And the May PMI is 2.8% above the 12-month average of 61.2, with March’s 64.7 being the highest and June 52.2 being the lowest for that time period.
ISM reported that 16 of the 18 manufacturing sectors it tracks experienced growth in May, including: Furniture and related products; Non-metallic mineral products; Plastic and rubber products; Textile factories; primary metals; Computer and electronic products; Electrical equipment, apparatus and components; Fabricated metal products; Food, drink and tobacco products; Machinery; Chemical products; Various manufacturing; Transport equipment; Wood products; Paper products; and Petroleum and Coal Products. The only industry that contracted in May was printing and related support activities.
The report’s major manufacturing metrics were mixed in May.
New orders, which are commonly referred to as the engine of manufacturing, rose 2.7% to 67.0, increasing, at a slower pace, for the 12th consecutive month. The ISM said 16 of 18 manufacturing sectors recorded growth in May.
Production, at 58.5, was down 4% from April, increasing, at a slower pace, for the 12th consecutive month, and was also down almost 10% from the recent high of 68 , 1 in March (the highest monthly figure for production since January 2004’s 69.3). Employment, at 50.9, was down 4.2%, increasing at a slower pace for the sixth consecutive month, and inventories, at 50.8, rose after contracting in April.
Other notable measures include:
- Supplier deliveries – at 78.8 (a reading above 50 indicates a contraction) – slowed, at a faster pace, for the 63rd consecutive month, after April’s 75.0, supplier delivery performance manufacturing organizations being slower in May;
- The order backlog – at 70.6 – rose 2.4%, increasing at a faster pace for the 11th consecutive month, marking the highest reading for this sub-index since the ISM began trading it. report in January 1993.
- Customer inventories fell 0.4% to 28.0, falling too low, at a faster pace, for the 56th consecutive month; and
- Prices are down 1.6%, to 88.0, increasing, at a slower pace, for the 12th consecutive month, with prices in the past four months at their highest levels since July 2008, the latest of five consecutive months at more than 80%, when it recorded 90.4 percent
Comments from ISM respondents included in the report reflected the impact of reopening businesses, as well as concerns on different fronts.
“Supplier performance – deliveries, quality, it’s all overdue. Demand is high and we are struggling to find employees to help us keep pace, ”said a respondent at Computer & Electronic Products.
And concerns about labor shortages were an issue for respondents from various industries. A respondent from Electrical Equipment Appliances & Components said labor shortages are impacting in-house production and that of suppliers, adding that logistics performance has been “terrible”.
Tim Fiore, chairman of the ISM Manufacturing Company Inquiry Committee, said employment at ISM panelists continues to face challenges in hiring for product delivery, associated to related supply chain efficiency issues.
Addressing the still impressive reading of new orders, Fiore attributed some of that to the traditionally important month of May for manufacturing.
“We have raw material lead times at record levels now, as long as we haven’t had them at such high levels, at least since the 1970s,” he said. “This could stimulate more and more business, as people have to cover their pending orders with extended delivery times. They need controls in place to cover this. “
The three-month period starting in April signals a hectic time for manufacturing, Fiore noted, before preparing for the holidays and also with many manufacturing workers taking time off in July and August, labor levels work tending to decline during these summer months.
With inventories rising more than 4% in May, Fiore said it was reasonable to expect it to stay within its current range until the number of supplier deliveries clears somewhat. .
“Until [supplier deliveries] number is going down, I don’t expect stocks to go up that much, ”he said. “I was happy that the raw material inventory number did not contract again like it did the month before. What I would expect is that the vendor delivery number will decrease as more people enter the workforce and more than 20 states indicate they will no longer pay for allowances. improved unemployment. It will take June and maybe July to really show up. Supplier delivery numbers will go down, inventory number will go up, not much more than the 54-55 level. But, more importantly, the production number will return to the 63-64 range. There is so much work to be done here, with record backlogs, record customer inventories and record delivery times. There are a lot of opportunities to produce; we just don’t have the people to do it.
About the Author
Jeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics management, Handling of modern materials, and Supply chain management review. Jeff works and lives in Cape Elizabeth, Maine where he covers all aspects of the supply chain, logistics, freight transportation and material handling industries on a daily basis. Contact Jeff Berman