Manufacturing Contracts Again: ISM

Manufacturing Contracts Again: ISM

June 4, 2024
"Demand remains elusive as companies demonstrate an unwillingness to invest due to current monetary policy and other conditions."

For the second month in a row, the manufacturing sector has contracted, according to the June 3 ISM report. 

U.S. manufacturing activity continued in contraction after growing in March, the first expansion for the sector since September 2022," said Timothy Fiore, of ISM, in a statement. "Demand was soft again, output was stable, and inputs stayed accommodative. "

The Manufacturing PMI registered 48.7% in May, down 0.5 percentage point from the 49.2% recorded in April.

The overall economy continued in expansion for the 49th month after one month of contraction in April 2020

The Supplier Deliveries Index figure of 48.9% equaled the reading recorded in April. 

Other index reports include:

  • The Inventories Index registered 47.9%, down 0.3 percentage point compared to April's reading of 48.2%.
  • The New Orders Index remained in contraction territory, registering 45.4%, 3.7 percentage points lower than the 49.1% recorded in April.
  • The Production Index registered 50.2%) which is 1.1 percentage points lower than April's figure of 51.%.
  • The Prices Index registered 57%, down 3.9 percentage points compared to the reading of 60.9% in April.
  • The Backlog of Orders Index registered 42.4 %t, down 3 percentage points compared to the 45.4% recorded in April.
  • The New Export Orders Index reading of 50.6% is 1.9 percentage points higher than the 48.7% registered in April.
  • The Imports Index continued in expansion territory, registering 51.1%, 0.8 percentage point lower than the 51.9% reported in April.
  • The Employment Index registered 51.1%, up 2.5 percentage points from April's figure of 48.6%. 

"Demand remains elusive as companies demonstrate an unwillingness to invest due to current monetary policy and other conditions," said Fiore. "These investments include supplier order commitments, inventory building and capital expenditures. Production execution continued to expand but was essentially flat compared to the previous month. Suppliers continue to have capacity, with lead times improving and shortages not as severe." 

What Respondents are Saying

  • "Seems like a minor slowdown is happening. With less spending in the economy, less pressure on us for our products." [Chemical Products]
  • "Business conditions are pacing with budget and forecast for 2024. Certain markets are soft, but others are ahead of forecast, allowing us to maintain overall. Concerns with the economy continue to drive business decisions." [Transportation Equipment]
  • "Volume continues to be challenging, mostly due to inflationary impacts." [Food, Beverage & Tobacco Products]
  • "Orders have started to rebound, but inventory levels remain high enough for no impact on our supplier orders. It will take a few more strong months before supplier orders are reactivated or increased." [Computer & Electronic Products]
  • "Backlog is dwindling as we get caught up on orders; new orders are not coming in as robust as the backlog is going down. Inflation continues to be a problem with pricing of raw material and interest rates. We expect a flat rest of calendar year 2024, especially given that it's a presidential election year." [Machinery]
  • "Export shipments continue to be soft as capital equipment sales remain lower than forecast. As a result, production is also trending lower and inventory that is not able to be pushed out is growing." [Fabricated Metal Products]
  • "Demand has been strong the first few months — ahead of budget, consistent with last year. Bookings are starting to slow down for May and June. We are monitoring this data closely to determine if it is a sign of decline or our typical cyclical demand." [Electrical Equipment, Appliances & Components]
  • "Business is picking up, with incoming bookings increasing." [Furniture & Related Products]
  • "Overall softening of markets for the month of June. Some impacts on a regional basis with the continued weather in the northeast, south and southeast regions. Delays in shipments continue across multiple regions." [Petroleum & Coal Products]
  • "General concern about overall industry economics. Pricing weakness continues, and we anticipate more headwinds in the coming months for spot orders and inflation. Contract order book remains steady." [Primary Metals]