The May ISM manufacturing index fell a touch to 46.9 from 47.1 and about as expected. It does mark the 7th straight month of manufacturing contraction. New orders fell down to 42.6, backlogs stand at just 37.5 and inventories dropped to 45.8. Customer inventories were little changed at 51.4. Export orders were right at 50 vs 49.8 in the month before while imports dropped to 47.3. Employment, on the heels of the drop seen in ADP, was 51.4 vs 50.2 and 46.9 in the month before. Supplier deliveries fell another 1.1 pts and prices paid dropped a sharp 9 pts to back under 50 at 44.2.
For all these figures, go back to 2009, not including Covid, as for the last time we saw these levels (measuring direction of growth, not degree).
Of the 18 industries surveyed, just 4 saw growth and 14 are experiencing a contraction vs 5 up and 11 down in April.
Bottom line, the supply chains are mostly unclogged and price pressures have receded a lot which is great but the problem now instead is that demand for discretionary goods is weak and only good for non-discretionary like food, drug and home care.
This is what S&P Global said in their US mfr’g report which fell back under 50 at 48.4: “May saw a renewed deterioration of business conditions in the US manufacturing economy which will add to concerns about broader economic health and recession risks…Unless demand picks up, production growth will move into decline seen as it is clearly unsustainable to rely solely on backlogs of orders, which are now being depleted at the fastest rates for three years. Hence companies are cutting back sharply on their input buying and seeking to minimize inventory, tightening their belts for tough times ahead.”
ISM Mfr’g
New Orders
Backlogs
Prices Paid