After Drop to Level not Seen since July 2020 in April, the May PMI Stays Strong in Face of Headwinds

The US Purchasing Managers Index (PMI) for May, released this week by the Institute for Supply Management (ISM), was up just a little from the April reading and was comfortably above the key 50 level that separates US  manufacturing expansion from contraction.

Supply Chain Digest Says...   Fifteed of the of the 16 manufacturing industries ISM tracks reported growth in May, with only the furniture sector seeing a decline in the month. What do you say? Click here to send us your comments   Click here to see reader feedback

The May PMI came in at a solid score of 56.1, an increase of 0.7 percentage point from the reading of 55.4 in April. That April score caused some worry about a slowdown in US manufacturing despite being in the mid-50s because it was the lowest level of the index since July 2020.

But with this small increase in the index for May, it appears US manufacturing continues to defy headwinds such as of rampant inflation, the Ukraine war effect, sinking stock market, and other pressures.

This May figure indicates expansion in the US overall economy for the 25th month in a row after the last contractions in April and May 2020. (See chart of the PMI scores for the last 12 months below - the average score over that period was a strong 58.8.)

Other measures in the ISM report were mostly modestly positive. For example, the important New Orders Index came in at 56.1, a small increase of 0.7 percentage point from the reading of 55.4 in April after declining last month. The Backlog of Orders Index registered 58.7, which was 2.7 percentage points higher than the April reading of 56.

The Inventories Index registered 55.9, which was 4.3 percentage points higher than the April reading of 51.6. meaning companies are adding to inventoy levels.

The Production Index reading of of 54.2 was a 0.6-percentage point increase compared to April’s figure of 53.6.

The Prices Index, which tracks the cost of materials and components from suppliers, came in at 82.2, down 2.4 percentage points compared to the April figure of 84.6.

However, it still means 82.2% of respondents indicated they were seeing rising costs from suppliers.

US PMI Last 12 Months

Source: ISM

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Fifteed of the of the 16 manufacturing industries ISM tracks reported growth in May, with only the furniture sector seeing a decline in the month.

As always, there were some interestng comments from PMI survey respondents. For example, one chemical industry manager said this: "“While orders remain strong and backlogs exist, there’s a softening in forecasted orders for leading indicator-type customers and business units."

Added a manager in a food: “Input costs, particularly grain, oil, dairy and protein, are rising faster than can be passed along at retail and food service, with no relief in sight."

Finally, manager in a not identified manufacturing sector had this to say: "Supply chain issues are causing us to dramatically extend our lead times. Our production lines have (run) low on or out of parts needed to complete rates every week this month.

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