Manufacturing Sector Still Growing Says Supply Management Group Thomas Niedermueller, Getty Images News

Manufacturing Sector Still Growing Says Supply Management Group

Economic activity in the manufacturing sector expanded in May for the 29th consecutive month, and the overall economy grew for the 72nd consecutive month, said the nation’s supply executives in the latest report from the Institute for Supply Management.

The group’s Purchasing Managers’ Index registered 52.8%, an increase of 1.3 percentage points over the April reading of 51.5%.

“The May report adds to other recent data that show that the U.S. manufacturing sector is in a modest rebound from its first quarter contraction,” said Cliff Waldman, director of economic studies for the MAPI Foundation, the research affiliate of the Manufacturers Alliance for Productivity and Innovation. “The index increased by 1.3 percentage points in May to 52.8%, nearly matching the February level of 52.9% but still below the December 2014 level of 55.1%.

“Reflecting the mixed factory sector picture, the New Orders Index increased by 2.3 percentage points and the Production Index slipped by 1.5 percentage points,” he added. “Encouragingly for short-term production gains, the backlog of orders, which slipped slightly below the critical 50% level that separates growth from contraction, rebounded nicely to 53.5% in May.

“While the U.S. factory sector has clearly resumed a growth path, transitory factors such as difficult weather and the work slowdown at the western ports were not the only catalysts for the very weak performance in the first quarter; challenges remain beyond the winter months,” Waldman added. “The global economic picture remains mired in difficulties. Key countries are slowing, are experiencing sluggish growth, or are in recession. The increasingly uncertain U.S. economic outlook is only exacerbated by a lack of clarity on the likely short-term path for monetary and fiscal policies. The elevated dollar is yet another impediment to strong manufacturing performance.”

Other report highlights include the  Employment Index which registered 51.7%, 3.4 percentage points above the April reading of 48.3%, reflecting growing employment levels from April.

And the Inventories of raw materials registered 51.5%, an increase of 2 percentage points from the April reading of 49.5%. The Prices Index registered 49.5%, 9 percentage points above the April reading of 40.5%, indicating lower raw materials prices for the seventh consecutive month.

All of this positive movement should continue.  “Moderate U.S. manufacturing output growth should continue for the balance of 2015 and into 2016. But downside risks remain,” Waldman concluded.

 

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