A report from
the Institute for Supply Management (ISM) showed on Monday the U.S.
manufacturing sector’s activity contracted in May, albeit at a slower pace than
in April.
The ISM's index of manufacturing activity came in at 43.1 percent last month, up 1.6 percentage points from the April reading of 41.5 percent, which was the lowest since April 2009. Economists' had forecast the indicator to increase to 43.0 percent.
A reading above
50 percent indicates expansion, while a reading below 50 percent indicates
contraction.
According to
the report, the New Orders Index stood at 31.8 percent, an advance of 4.7
percentage points from the April reading, while the Production Index registered
33.2 percent, up 5.7 percentage points compared to the April reading, the
Backlog of Orders Index posted 38.2 percent, a gain of 0.4 percentage point
compared to the April reading, and the Employment Index came in at 32.1
percent, an increase of 4.6 percentage points from the April reading.
Meanwhile, the Supplier Deliveries Index registered 68 percent, down 8
percentage points from the April figure, still elevating the composite PMI.
Timothy R.
Fiore, Chair of the ISM Manufacturing Business Survey Committee, noted that
comments from the panel were cautious regarding the near-term outlook, as the
coronavirus pandemic impacted all manufacturing sectors for the third straight
month. “May appears to be a transition month, as many panelists and their
suppliers returned to work late in the month. However, demand remains
uncertain, likely impacting inventories, customer inventories, employment,
imports and backlog of orders. Among the six biggest industry sectors, Food,
Beverage & Tobacco Products remains the only industry in expansion.
Transportation Equipment; Petroleum & Coal Products; and Fabricated Metal
Products continue to contract at strong levels,” said Fiore. He also added that
the past relationship between the PMI and the overall economy indicates that
the PMI for May (43.1 percent) corresponded to a 0.1-percent increase in real
gross domestic product (GDP) on an annualized basis.
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