EconoFACTS

June 01, 2023 | 10:42

U.S. ISM Manufacturing PMI ... Still Under The Sea

Economist

Jennifer Lee

Senior Economist and Managing Director
Economics

(Read more)

Jennifer Lee

Senior Economist and Managing Director
Economics

(Read more)

About that recession .......

Various areas of the economy have surprisingly hung in there .... think consumer spending (retail sales), housing, job openings (still shocked over that one), core durable goods orders..... but for manufacturing, the struggle continues.

The ISM manufacturing PMI slipped by 0.2 pts to a 2-month low of 46.9 in May, basically in-line with expectations and the third decline in the past five months but the most modest setback of the bunch. Still, that is seven straight months below 50, or, in contraction territory. Of the five equally-weighted components, this was the rundown... new orders -3.1 pts to near 3-year lows, production +2.2 pts, the 3rd increase in a row and expanding for the first time in half a year, employment +1.2 pts (2nd increase in a row), inventories -0.5 pts (5th decline in a row), and supplier deliveries were less delayed for the fourth month in a row, which is negative for the index but who likes it when their stuff is delayed? Good news for the Federal Reserve... prices paid took a 9 pt dive to a 5-mth low of 44.2.

Of the above, the new orders level is the most concerning. See the chart below.

The comments from the respondents, however, weren't all negative. Orders were described as "strong" and "gaining momentum" by some, one sector mentioned that labor shortages were "getting better", and that there was "less volatility". But, those in electrical equipment said that "a slowdown is clear", and transportation mentioned "new orders are slowing". A couple of other notable comments: computer & electronics said that business was "weakened by lending to support capital purchasing" (interesting) and food, beverage & tobacco products complained of high food costs, but that their customers were "beginning to push back".

Meantime, offsetting that negative was construction spending. It blew past expectations with a 1.2% jump in April (both public and private) and though March was surprisingly unrevised at +0.3%, February's 0.3% decline is now a 2.4% increase. Ah, the trend of those pesky revisions that are quite meaningful continues. Take these numbers with a grain of salt; but, for now, they're good news. Some interesting tidbits ... most of the increase was in non-residential construction (though residential also rose), of which commercial and offices rose around 0.7%. Odd.

Bottom Line: The slowdown is still coming.... that story hasn't changed. But it may become more notable later this summer...

Table 1 - United States — ISM Manufacturing PMI

(percent reporting)

Source: BMO Economics, Haver Analytics