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Manufacturing Contracting at Faster Rate : ISM

Manufacturing Contracting at Faster Rate: ISM

June 2, 2023
There is clearly more business uncertainty in May, says ISM.

ISM's May Manufacturing PMI registered 46.9%, 0.2 percentage point lower than the 47.1% recorded in April.

With this contraction, it marks the seventh month in a row that the sector contracted. It follows a 28-month period of growth. 

“The U.S. manufacturing sector shrank again, with the Manufacturing PMI losing a bit of ground compared to the previous month, indicating a faster rate of contraction," said Timothy Fiore, in a statement. "The May composite index reading reflects companies continuing to manage outputs to better match demand for the first half of 2023 and prepare for growth in the late summer/early fall period. However, there is clearly more business uncertainty in May. "

Key findings:

  • The Supplier Deliveries Index figure of 43.5% is 1.1 percentage points lower than the 44.6% recorded in April; this is the index’s lowest reading since March 2009 (43.2 %)
  • The Inventories Index dropped 0.5 percentage point to 45.8% the April reading was 46.3%.
  • The New Orders Index remained in contraction territory at 42.6%, 3.1 percentage points lower than the figure of 45.7% recorded in April. T
  • The Production Index reading of 51.1% is a 2.2-percentage point increase compared to April’s figure of 48.9%.
  • The Prices Index registered 44.2%, down 9 percentage points compared to the April figure of 53.2%.
  • The Backlog of Orders Index registered 37.5%, 5.6 percentage points lower than the April reading of 43.1%.
  • The Employment Index indicated another month of expansion, registering 51.4%, up 1.2 percentage points from April’s reading of 50.2%.
  • The New Export Orders Index reading of 50% is 0.2 percentage point higher than April’s figure of 49.8%. The Imports Index remained in contraction territory, registering 47.3%, 2.6 percentage points lower the 49.9% reported in April.”

What Respondents Are Saying

  • “Overall impact for our business is mixed. Our scientific instrumentation business continues to be weakened by lending to support capital purchasing, while services and consumables stay on track and continue to increase in some markets. Hiring has slowed in response to continued global uncertainty on inflation and unrest in Europe.” [Computer & Electronic Products]
  • “Demand continues to gain momentum due to new business pipelines finally yielding billable production. Personal care and home care are drivers.” [Chemical Products]
  • “We continue to have a strong backlog for our customer orders; however, new orders are slowing. Our supplier on-time delivery continues to be a challenge for us, and we still face price increases on a weekly basis. Labor shortages are getting better within our organization and throughout our supply chain.” [Transportation Equipment]
  • “Pricing seems to be becoming the primary focus of supply and sourcing teams, as customers and consumers are beginning to push back. While inflation is easing on some discretionary goods, high food costs persist across most categories.” [Food, Beverage & Tobacco Products]
  • “Business is returning to pre-pandemic levels. There is increased demand in commercial/government markets and reduced demand in residential/consumer markets.” [Machinery]
  • “Less volatility in customer demand from one month to six months out; seeing signs of slowing in the second half of 2023 and potentially into early 2024. Logistics, particularly from East Asia, continue to return to historical-level transit times; Europe and India remain elevated. Supply shortages are limited to select items only. Suppliers are still seeking price increases but are too late to be asking now.” [Fabricated Metal Products]
  • “Although sales are slightly lower, they are holding at current rate — soft, not catastrophic.” [Furniture & Related Products]
  • “Moderate increase in customer orders/demand, supplier deliveries improving, and raw material prices stable to soft.” [Plastics & Rubber Products]
  • “Business conditions are good, demand remains strong, and we are continuing to ramp up production to keep up.” [Miscellaneous Manufacturing]
  • “Industrial and high-tech demands are pushing out, as a slowdown is clear. This is stunting growth and currently making 2023 demand look flat to only slightly up, compared to original projections of 10-percent growth.” [Electrical Equipment, Appliances & Components]

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