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PMI' at 54.9%; May Manufacturing ISM' Report On Business'; New Orders, Inventories and Employment Growing; Supplier Deliveries Slowing; Prices Increasing

By: Jun. 01, 2017
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TEMPE, Ariz., June 1, 2017 /PRNewswire/ Economic activity in the manufacturing sector expanded in May, and the overall economy grew for the 96th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business .

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM ) Manufacturing Business Survey Committee: "The May PMI registered 54.9 percent, an increase of 0.1 percentage point from the April reading of 54.8 percent. The New Orders Index registered 59.5 percent, an increase of 2 percentage points from the April reading of 57.5 percent. The Production Index registered 57.1 percent, a 1.5 percentage points decrease compared to the April reading of 58.6 percent. The Employment Index registered 53.5 percent, an increase of 1.5 percentage points from the April reading of 52 percent. The Inventories Index registered 51.5 percent, an increase of 0.5 percentage point from the April reading of 51 percent. The Prices Index registered 60.5 percent in May, a decrease of 8 percentage points from the April reading of 68.5 percent, indicating higher raw materials prices for the 15th consecutive month, but at a noticeably slower rate of increase in May compared with April. 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. 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."

Of the 18 manufacturing industries, 15 reported growth in May in the following order: Nonmetallic Mineral Products; Furniture & Related Products; Plastics & Rubber Products; Machinery; Primary Metals; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; Transportation Equipment; Chemical Products; Fabricated Metal Products; Petroleum & Coal Products; and Printing & Related Support Activities. Two industries reported contraction in May compared to April: Apparel, Leather & Allied Products; and Textile Mills.

WHAT RESPONDENTS ARE SAYING

  • "Sales have picked up compared to the last two months. Customer demand has increased." (Plastics & Rubber Products)
  • "Economy is still strong, but [the] political climate can change things very quickly." (Transportation Equipment)
  • "Global price increases for commodities." (Electrical Equipment, Appliances & Components)
  • "Business (sales/production) is steady. Pricing pressures on raw materials. Skilled labor in short supply." (Furniture & Related Products)
  • "Agricultural demand very strong." (Chemical Products)
  • "Our business is definitely paying attention to developments with the Canadian lumber tariff announcement. The final outcome could change our fiber pricing." (Paper Products)
  • "OEM longer lead parts possibly longer lead time due to more orders." (Nonmetallic Mineral Products)
  • "Business conditions are steady, and with competition increasing, it's making negotiations even more intense to reduce costs." (Machinery)
  • "Business is booming, and getting direct employees is increasingly difficult." (Fabricated Metal Products)
  • "Difficult to find qualified labor for factory positions." (Food, Beverage & Tobacco Products)

MANUFACTURING AT A GLANCE
May 2017

Index

Series Index

May

Series Index

Apr

Percentage

Point

Change

Direction

Rate of Change

Trend* (Months)

PMI

54.9

54.8

+0.1

Growing

Faster

9

New Orders

59.5

57.5

+2.0

Growing

Faster

9

Production

57.1

58.6

-1.5

Growing

Slower

9

Employment

53.5

52.0

+1.5

Growing

Faster

8

Supplier Deliveries

53.1

55.1

-2.0

Slowing

Slower

13

Inventories

51.5

51.0

+0.5

Growing

Faster

2

Customers' Inventories

49.5

45.5

+4.0

Too Low

Slower

8

Prices

60.5

68.5

-8.0

Increasing

Slower

15

Backlog of Orders

55.0

57.0

-2.0

Growing

Slower

4

New Export Orders

57.5

59.5

-2.0

Growing

Slower

15

Imports

53.5

55.5

-2.0

Growing

Slower

4

OVERALL ECONOMY

Manufacturing Sector

Growing

Faster

96

Growing

Faster

9

Manufacturing ISM Report On Business data is seasonally adjusted for the New Orders, Production, Employment and Supplier Deliveries Indexes.
*Number of months moving in current direction.

COMMODITIES REPORTED UP/DOWN IN PRICE AND IN SHORT SUPPLY

Commodities Up in Price
Aluminum (7); Corrugate (8); Corrugated Boxes (3); Lumber (2); Oil (2); Plastic Resin (3); Polypropylene (4); Rubber; Scrap Metal (4); Steel* (17); Steel Cold Rolled (7); Steel Hot Rolled (6); and Steel Tubing (4).

Commodities Down in Price
Butadiene; Copper; Methanol; Nickel; and Steel*.

Commodities in Short Supply
Capacitors; Electronic Components (3); and Methacrylates.

Note: The number of consecutive months the commodity is listed is indicated after each item.
*Indicates both up and down in price.

MAY 2017 MANUFACTURING INDEX SUMMARIES

PMI
Manufacturing expanded in May as the PMI registered 54.9 percent, an increase of 0.1 percentage point from the April reading of 54.8 percent, indicating growth in manufacturing for the ninth consecutive month. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI above 43.3 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the May PMI indicates growth for the 96th consecutive month in the overall economy and the ninth straight month of growth in the manufacturing sector. Fiore stated, "The past relationship between the PMI and the overall economyindicates that the average PMI for January through May (56.1 percent) corresponds to a 4.0 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI for May (54.9 percent) is annualized, it corresponds to a 3.7 percent increase in real GDP annually."

THE LAST 12 MONTHS

Month

PMI


Month

PMI

May 2017

54.9


Nov 2016

53.5

Apr 2017

54.8


Oct 2016

52.0

Mar 2017

57.2


Sep 2016

51.7

Feb 2017

57.7


Aug 2016

49.4

Jan 2017

56.0


Jul 2016

52.3

Dec 2016

54.5


Jun 2016

52.8

Average for 2017 56.1

Average for 12 months 53.9

High 57.7

Low 49.4

New Orders
ISM 's New Orders Index registered 59.5 percent in May, which is an increase of 2 percentage points when compared to the 57.5 percent reported for April, indicating growth in new orders for the ninth consecutive month. New orders returned to the higher (near 60) levels since experienced in December 2016. A New Orders Index above 52.3 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

Fourteen of 18 industries reported growth in new orders in May, listed in the following order: Paper Products; Primary Metals; Machinery; Nonmetallic Mineral Products; Chemical Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Furniture & Related Products; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Plastics & Rubber Products; Computer & Electronic Products; and Transportation Equipment. The only industry reporting a decrease in new orders in May compared to April is Apparel, Leather & Allied Products.

New Orders

%Better

%Same

%Worse

Net

Index

May 2017

34

57

9

+25

59.5

Apr 2017

38

51

11

+27

57.5

Mar 2017

45

45

10

+35

64.5

Feb 2017

42

48

10

+32

65.1

Production
ISM 's Production Index registered 57.1 percent in May, which is a decrease of 1.5 percentage points when compared to the 58.6 percent reported for April, indicating growth in production for the ninth consecutive month. An index above 51.4 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.

The 14 industries reporting growth in production during the month of May listed in order are: Plastics & Rubber Products; Nonmetallic Mineral Products; Primary Metals; Furniture & Related Products; Paper Products; Fabricated Metal Products; Printing & Related Support Activities; Chemical Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Machinery; Transportation Equipment; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The only industry reporting a decrease in production in May compared to April is Apparel, Leather & Allied Products.

Production

%Better

%Same

%Worse

Net

Index

May 2017

31

57

12

+19

57.1

Apr 2017

39

53

8

+31

58.6

Mar 2017

34

53

13

+21

57.6

Feb 2017

37

53

10

+27

62.9

Employment
ISM 's Employment Index registered 53.5 percent in May, an increase of 1.5 percentage points when compared to the April reading of 52 percent, indicating growth in employment in May for the eighth consecutive month. Employment levels have been expanding since October 2016, and the search for qualified workers (as mentioned by multiple respondents) has become more difficult. An Employment Index above 50.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Of the 18 manufacturing industries, the 11 reporting employment growth in May listed in order are: Furniture & Related Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Computer & Electronic Products; Food, Beverage & Tobacco Products; Machinery; Paper Products; Primary Metals; Petroleum & Coal Products; and Plastics & Rubber Products. The five industries reporting a decrease in employment in May are: Textile Mills; Apparel, Leather & Allied Products; Fabricated Metal Products; Chemical Products; and Transportation Equipment.

Employment

%Higher

%Same

%Lower

Net

Index

May 2017

23

65

12

+11

53.5

Apr 2017

24

63

13

+11

52.0

Mar 2017

27

62

11

+16

58.9

Feb 2017

21

66

13

+8

54.2

Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations was slower in May, as the Supplier Deliveries Index registered 53.1 percent, which is 2 percentage points lower than the 55.1 percent reported for April. This is the 13th straight month of slowing supplier deliveries, indicating supply chains are adjusting to increased demand levels. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

The 11 industries reporting slower supplier deliveries in May listed in order are: Nonmetallic Mineral Products; Plastics & Rubber Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Computer & Electronic Products; Chemical Products; Fabricated Metal Products; Machinery; Food, Beverage & Tobacco Products; and Transportation Equipment. Six industries reported no change in supplier deliveries in May compared to April. No industries reported faster deliveries in May compared to April.

Supplier Deliveries

%Slower

%Same

%Faster

Net

Index

May 2017

13

82

5

+8

53.1

Apr 2017

17

79

4

+13

55.1

Mar 2017

16

81

3

+13

55.9

Feb 2017

16

79

5

+11

54.8

Inventories*
The Inventories Index registered 51.5 percent in May, which is an increase of 0.5 percentage point when compared to the 51 percent reported for April, indicating raw materials inventories are growing in May. An Inventories Index greater than 42.9 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

The six industries reporting higher inventories in May listed in order are: Furniture & Related Products; Nonmetallic Mineral Products; Transportation Equipment; Miscellaneous Manufacturing; Plastics & Rubber Products; and Food, Beverage & Tobacco Products. The six industries reporting lower inventories in May listed in order are: Paper Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Primary Metals; Chemical Products; and Fabricated Metal Products. Six industries reported no change in inventory in May compared to April.

Inventories

%Higher

%Same

%Lower

Net

Index

May 2017

18

67

15

+3

51.5

Apr 2017

19

64

17

+2

51.0

Mar 2017

18

62

20

-2

49.0

Feb 2017

19

65

16

+3

51.5

Customers' Inventories*
ISM 's Customers' Inventories Index registered 49.5 percent in May, which is 4 percentage points higher than the 45.5 percent reported for April, indicating that customers' inventory levels are considered too low in May for the eighth consecutive month, but are approaching equilibrium.

The six manufacturing industries reporting customers' inventories as being too high during the month of May listed in order are: Primary Metals; Furniture & Related Products; Transportation Equipment; Food, Beverage & Tobacco Products; Chemical Products; and Computer & Electronic Products. The four industries reporting customers' inventories as too low during May are: Plastics & Rubber Products; Fabricated Metal Products; Paper Products; and Machinery. Seven industries reported no change in customer inventory levels in May compared to April.

Customers' Inventories

% Reporting

%Too High

%About Right

%Too Low

Net

Index

May 2017

56

14

71

15

-1

49.5

Apr 2017

54

9

73

18

-9

45.5

Mar 2017

53

14

66

20

-6

47.0

Feb 2017

53

15

65

20

-5

47.5

Prices*
The ISM Prices Index registered 60.5 percent in May, a decrease of 8 percentage points when compared to the April reading of 68.5 percent, indicating an increase in raw materials prices for the 15th consecutive month. In May, 30 percent of respondents reported paying higher prices, 9 percent reported paying lower prices, and 61 percent of supply executives reported paying the same prices as in April. Fiore commented, "A review of 'Commodities Up in Price' indicates that basic commodity cost increases experienced in 2016 have made their way into higher value components, and with these costs moderating, more normal buying policies focused on supply assurance at affordable prices will be more prevalent." A Prices Index above 52.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.

Of the 18 manufacturing industries, the 15 that reported paying increased prices for its raw materials in May listed in order are: Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Furniture & Related Products; Miscellaneous Manufacturing; Machinery; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Paper Products; Chemical Products; Plastics & Rubber Products; Transportation Equipment; Computer & Electronic Products; Fabricated Metal Products; and Petroleum & Coal Products. The only industry reporting paying lower prices in May compared to April is Primary Metals.

Prices

%Higher

%Same

%Lower

Net

Index

May 2017

30

61

9

+21

60.5

Apr 2017

44

49

7

+37

68.5

Mar 2017

47

47

6

+41

70.5

Feb 2017

41

54

5

+36

68.0

Backlog of Orders*
ISM 's Backlog of Orders Index registered 55 percent in May, a decrease of 2 percentage points from the 57 percent reported for April, indicating growth in order backlogs for the fourth consecutive month. Of the 90 percent of respondents who reported their backlog of orders, 23 percent reported greater backlogs, 13 percent reportEd Smaller backlogs, and 64 percent reported no change from April.

The eight industries reporting growth in order backlogs in May listed in order are: Paper Products; Primary Metals; Furniture & Related Products; Fabricated Metal Products; Machinery; Plastics & Rubber Products; Computer & Electronic Products; and Transportation Equipment. The two industries reporting a decrease in order backlogs during May are: Apparel, Leather & Allied Products; and Miscellaneous Manufacturing. Eight industries reported the same level of backlog in May as compared to April.

Backlog of Orders

% Reporting

%Greater

%Same

%Less

Net

Index

May 2017

90

23

64

13

+10

55.0

Apr 2017

88

29

56

15

+14

57.0

Mar 2017

89

27

61

12

+15

57.5

Feb 2017

88

26

62

12

+14

57.0

New Export Orders*
ISM 's New Export Orders Index registered 57.5 percent in May, a decrease of 2 percentage points when compared to the 59.5 percent reported for April, indicating growth in new export orders for the 15th consecutive month.

The 11 industries reporting growth in new export orders in May listed in order are: Textile Mills; Wood Products; Paper Products; Furniture & Related Products; Transportation Equipment; Food, Beverage & Tobacco Products; Primary Metals; Miscellaneous Manufacturing; Plastics & Rubber Products; Machinery; and Chemical Products. The two industries reporting a decrease in new export orders during May are: Computer & Electronic Products; and Fabricated Metal Products.

New Export Orders

% Reporting

%Higher

%Same

%Lower

Net

Index

May 2017

77

20

75

5

+15

57.5

Apr 2017

78

25

69

6

+19

59.5

Mar 2017

78

23

72

5

+18

59.0

Feb 2017

80

16

78

6

+10

55.0

Imports*
ISM 's Imports Index registered 53.5 percent in May, a decrease of 2 percentage points when compared to the 55.5 percent reported for April, indicating that imports are growing in May for the fourth consecutive month but at a slower rate.

The seven industries reporting growth in imports during the month of May listed in order are: Transportation Equipment; Nonmetallic Mineral Products; Furniture & Related Products; Machinery; Chemical Products; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The five industries reporting a decrease in imports during May are: Primary Metals; Paper Products; Fabricated Metal Products; Plastics & Rubber Products; and Miscellaneous Manufacturing.

Imports

% Reporting

%Higher

%Same

%Lower

Net

Index

May 2017

81

12

83

5



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