U.S. Manufacturing Economic Activity Continued Picking up in May

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Economic activity in the U.S. manufacturing sector expanded in May for the 34th consecutive month, and the overall economy grew for the 36th consecutive month, according to the nation's supply executives in the latest Manufacturing ISM Report on Business. The report was issued this week by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management Manufacturing Business Survey Committee, Tempe, Ariz., USA.

The PMI registered 53.5%, a modest decrease of 1.3 percentage points from April's reading of 54.8%, indicating expansion in the manufacturing sector for the 34th consecutive month. The New Orders Index continued its growth trend for the 37th consecutive month, registering 60.1% in May. This represents an increase of 1.9 percentage points from April and also the highest level recorded by the index since April 2011. The Prices Index for raw materials fell to 47.5% in May, dropping 13.5 percentage points from April, indicating lower prices for the first time since December 2011. Comments from the panel generally reflect stable-to-strong orders, with sales showing steady improvement over the first five months of 2012.

Of the 18 manufacturing industries, 13 are reporting growth in May, in the following order: Nonmetallic Mineral Products; Furniture and Related Products; Apparel, Leather, and Allied Products; Miscellaneous Manufacturing; Primary Metals; Electrical Equipment, Appliances and Components; Fabricated Metal Products; Machinery; Textile Mills; Paper Products; Computer and Electronic Products; Printing and Related Support Activities; and Chemical Products. The four industries reporting contraction in May are: Plastics and Rubber Products; Petroleum and Coal Products; Food, Beverage, and Tobacco Products; and Transportation Equipment.

A PMI in excess of 42.6% over a period of time generally indicates an expansion of the overall economy. Therefore, the PMI at 53.5% in May indicates growth for the 36th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 34th consecutive month. Holcomb noted that "the past relationship between the PMI and the overall economy indicates that the average PMI for January through May (53.6%) corresponds to a 3.7% increase in real gross domestic product (GDP). In addition, if the PMI for May (53.5%) is annualized, it also corresponds to a 3.7% increase in real GDP annually."

The 13 industries reporting growth in new orders in May (listed in order) are: Furniture and Related Products; Apparel, Leather, and Allied Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Fabricated Metal Products; Wood Products; Electrical Equipment, Appliances, and Components; Primary Metals; Printing and Related Support Activities; Paper Products; Computer and Electronic Products; Machinery; and Chemical Products. The three industries reporting a decrease in new orders during May are: Plastics and Rubber Products; Food, Beverage, and Tobacco Products; and Transportation Equipment.

ISM's Production Index registered 55.6% in May, a decrease of 5.4 percentage points when compared with the 61% reported in April. This indicates growth for the 36th consecutive month. An index above 51.2% 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: Furniture and Related Products; Apparel, Leather, and Allied Products; Nonmetallic Mineral Products; Textile Mills; Fabricated Metal Products; Printing and Related Support Activities; Paper Products; Primary Metals; Machinery; Computer and Electronic Products; Plastics and Rubber Products; Electrical Equipment, Appliances, and Components; Miscellaneous Manufacturing; and Transportation Equipment. The two industries reporting a decrease in production in May are: Food, Beverage, and Tobacco Products; and Chemical Products.

ISM's Employment Index registered 56.9% in May, which is 0.4 percentage point lower than the 57.3% reported in April. This is the 32nd consecutive month of growth in the Employment Index. An Employment Index above 50.5% over time is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Of the 18 manufacturing industries,13 reported growth in employment in May in the following order: Apparel, Leather, and Allied Products; Nonmetallic Mineral Products; Textile Mills; Primary Metals; Furniture and Related Products; Machinery; Fabricated Metal Products; Transportation Equipment; Electrical Equipment, Appliances and Components; Miscellaneous Manufacturing; Computer and Electronic Products; Paper Products; and Chemical Products. The two industries reporting a decrease in employment in May are Wood Products and Food, Beverage, and Tobacco Products.

The full text version of the Report is available online.