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PMI® at 43.1%; May 2020 Manufacturing ISM® Report On Business®Production, New Orders, and Employment Contracting; Supplier Deliveries Slowing at Slower Rate; Backlog Contracting; Raw Materials Inventories Growing; Customers' Inventories Too Low; Prices Decreasing; Exports and Imports Contracting TEMPE, Ariz., June 1, 2020 /PRNewswire/ -- Economic activity in the manufacturing sector contracted in May, and the overall economy returned to expansion after one month of contraction, say the nation's supply executives in the latest Manufacturing ISM® Report On Business®. The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee: "The May PMI® registered 43.1 percent, up 1.6 percentage points from the April reading of 41.5 percent. This figure indicates expansion in the overall economy after April's contraction, which ended a period of 131 consecutive months of growth. The New Orders Index registered 31.8 percent, an increase of 4.7 percentage points from the April reading of 27.1 percent. The Production Index registered 33.2 percent, up 5.7 percentage points compared to the April reading of 27.5 percent. The Backlog of Orders Index registered 38.2 percent, an increase of 0.4 percentage point compared to the April reading of 37.8 percent. The Employment Index registered 32.1 percent, an increase of 4.6 percentage points from the April reading of 27.5 percent. The Supplier Deliveries Index registered 68 percent; though down 8 percentage points from the April figure of 76 percent, this high reading elevated the composite PMI®. "The Inventories Index registered 50.4 percent, 0.7 percentage point higher than the April reading of 49.7 percent. The Prices Index registered 40.8 percent, up 5.5 percentage points compared to the April reading of 35.3 percent. The New Export Orders Index registered 39.5 percent, an increase of 4.2 percentage points compared to the April reading of 35.3 percent. The Imports Index registered 41.3 percent, a 1.4-percentage point decrease from the April reading of 42.7 percent. "Three months into the manufacturing disruption caused by the coronavirus (COVID-19) pandemic, comments from the panel were cautious (two cautious comments for every one optimistic comment) regarding the near-term outlook. As was the case in April, the PMI® indicates a level of manufacturing-sector contraction not seen since April 2009; however, the trajectory improved. Demand contracted heavily again, with the (1) New Orders contracting at a strong level, again pushed by New Export Orders contraction; both indexes contracted at slower rates, (2) Customers' Inventories Index returning to a level considered a positive for future production, and (3) Backlog of Orders Index remaining in strong contraction territory, in spite of weak production during the period. Consumption (measured by the Production and Employment indexes) contributed positively (a combined 10.3-percentage point increase) to the PMI® calculation, with many panelists classified as non-essential beginning to return to work in late May. Inputs — expressed as supplier deliveries, inventories and imports — strengthened again due to supplier delivery issues that were partially offset by continuing imports sluggishness. The delivery issues were the result of disruptions in domestic and global supply chains, driven primarily by supplier plant shutdowns. Inventory expanded due to issues with throughput and demand weakness. Inputs contributed negatively (a combined 7.3-percentage point decrease) to the PMI® calculation. (The Supplier Deliveries and Inventories indexes directly factor into the PMI®; the Imports Index does not.) Prices continued to contract (but at a slower rate in May), supporting a negative outlook. "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," says Fiore. Of the 18 manufacturing industries, the six that reported growth in May — in the following order — are: Nonmetallic Mineral Products; Furniture & Related Products; Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Paper Products; and Wood Products. The 11 industries reporting contraction in May, in order, are: Printing & Related Support Activities; Primary Metals; Transportation Equipment; Petroleum & Coal Products; Fabricated Metal Products; Machinery; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Chemical Products; Computer & Electronic Products; and Plastics & Rubber Products. WHAT RESPONDENTS ARE SAYING
Manufacturing ISM® Report On Business® data is seasonally adjusted for the New Orders, Production, Employment and Inventories indexes. COMMODITIES REPORTED UP/DOWN IN PRICE AND IN SHORT SUPPLY Commodities Up in Price Commodities Down in Price Commodities in Short Supply Note: The number of consecutive months the commodity is listed is indicated after each item. MAY 2020 MANUFACTURING INDEX SUMMARIES PMI® A PMI® above 42.8 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the May PMI® indicates the overall economy grew very slightly following contraction in April, which ended a 131-month period of growth. The manufacturing sector contracted for the third consecutive month. "The past relationship between the PMI® and the overall economy indicates that the PMI® for May (43.1 percent) corresponds to a 0.1-percent increase in real gross domestic product (GDP) on an annualized basis," says Fiore. THE LAST 12 MONTHS
New Orders Of the 18 manufacturing industries, the four that reported growth in new orders in May are: Textile Mills; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; and Paper Products. The 12 industries reporting a decline in new orders in May — in the following order — are: Printing & Related Support Activities; Transportation Equipment; Primary Metals; Fabricated Metal Products; Miscellaneous Manufacturing; Petroleum & Coal Products; Computer & Electronic Products; Plastics & Rubber Products; Machinery; Chemical Products; Wood Products; and Electrical Equipment, Appliances & Components.
Production The four industries reporting growth in production during the month of May are: Furniture & Related Products; Wood Products; Food, Beverage & Tobacco Products; and Paper Products. The 11 industries reporting a decrease in production in May — listed in order — are: Printing & Related Support Activities; Miscellaneous Manufacturing; Primary Metals; Petroleum & Coal Products; Machinery; Transportation Equipment; Fabricated Metal Products; Chemical Products; Plastics & Rubber Products; Computer & Electronic Products; and Electrical Equipment, Appliances & Components.
Employment Of the 18 manufacturing industries, the two industries to report employment growth in May are: Apparel, Leather & Allied Products; and Paper Products. The 16 industries reporting a decrease in employment in May, in the following order, are: Printing & Related Support Activities; Textile Mills; Furniture & Related Products; Transportation Equipment; Primary Metals; Petroleum & Coal Products; Machinery; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Fabricated Metal Products; Wood Products; Food, Beverage & Tobacco Products; Chemical Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; and Plastics & Rubber Products.
Supplier Deliveries† All 18 industries reported slower supplier deliveries in May, in the following order: Miscellaneous Manufacturing; Apparel, Leather & Allied Products; Printing & Related Support Activities; Machinery; Computer & Electronic Products; Food, Beverage & Tobacco Products; Chemical Products; Transportation Equipment; Nonmetallic Mineral Products; Furniture & Related Products; Plastics & Rubber Products; Primary Metals; Textile Mills; Wood Products; Fabricated Metal Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; and Paper Products.
Inventories The seven industries reporting higher inventories in May, in order, are: Nonmetallic Mineral Products; Plastics & Rubber Products; Furniture & Related Products; Primary Metals; Transportation Equipment; Computer & Electronic Products; and Electrical Equipment, Appliances & Components. The seven industries reporting a decrease in inventories in May — listed in order — are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Machinery; Paper Products; Food, Beverage & Tobacco Products; Chemical Products; and Fabricated Metal Products.
Customers' Inventories† Of the 18 industries, the five industries reporting higher customers' inventories in May are: Wood Products; Transportation Equipment; Nonmetallic Mineral Products; Miscellaneous Manufacturing; and Furniture & Related Products. The 10 industries reporting customers' inventories as too low during May — listed in order — are: Apparel, Leather & Allied Products; Textile Mills; Printing & Related Support Activities; Paper Products; Fabricated Metal Products; Chemical Products; Machinery; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; and Computer & Electronic Products.
Prices† The three industries reporting paying increased prices for raw materials in May are: Textile Mills; Miscellaneous Manufacturing; and Computer & Electronic Products. The 14 industries reporting a decrease in prices for raw materials in May — listed in order — are: Plastics & Rubber Products; Wood Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Primary Metals; Transportation Equipment; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Machinery; Paper Products; Furniture & Related Products; Chemical Products; and Food, Beverage & Tobacco Products.
Backlog of Orders† The two industries reporting growth in order backlogs in May are: Textile Mills; and Paper Products. In May, 14 industries reported lower backlogs, in the following order: Transportation Equipment; Printing & Related Support Activities; Primary Metals; Fabricated Metal Products; Wood Products; Petroleum & Coal Products; Miscellaneous Manufacturing; Furniture & Related Products; Food, Beverage & Tobacco Products; Machinery; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Chemical Products; and Computer & Electronic Products.
New Export Orders† The two industries reporting growth in new export orders in May are: Paper Products; and Food, Beverage & Tobacco Products. The 12 industries reporting a decrease in new export orders in May, in the following order, are: Nonmetallic Mineral Products; Transportation Equipment; Printing & Related Support Activities; Miscellaneous Manufacturing; Fabricated Metal Products; Primary Metals; Furniture & Related Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Machinery; Computer & Electronic Products; and Chemical Products.
Imports† The three industries reporting growth in imports in May are: Apparel, Leather & Allied Products; Paper Products; and Food, Beverage & Tobacco Products. The 12 industries reporting a decrease in imports in May — in the following order — are: Printing & Related Support Activities; Transportation Equipment; Primary Metals; Furniture & Related Products; Machinery; Miscellaneous Manufacturing; Chemical Products; Nonmetallic Mineral Products; Fabricated Metal Products; Computer & Electronic Products; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components.
†The Supplier Deliveries, Customers' Inventories, Prices, Backlog of Orders, New Export Orders and Imports indexes do not meet the accepted criteria for seasonal adjustments. Buying Policy
About This Report The data presented herein is obtained from a survey of manufacturing supply executives based on information they have collected within their respective organizations. ISM® makes no representation, other than that stated within this release, regarding the individual company data collection procedures. The data should be compared to all other economic data sources when used in decision-making. Data and Method of Presentation Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (New Orders, Backlog of Orders, New Export Orders, Imports, Production, Supplier Deliveries, Inventories, Customers' Inventories, Employment and Prices), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction (higher, better and slower for Supplier Deliveries) and the negative economic direction (lower, worse and faster for Supplier Deliveries), and the diffusion index. Responses are raw data and are never changed. The diffusion index includes the percent of positive responses plus one-half of those responding the same (considered positive). The resulting single index number for those meeting the criteria for seasonal adjustments (PMI®, New Orders, Production, Employment and Inventories) is then seasonally adjusted to allow for the effects of repetitive intra-year variations resulting primarily from normal differences in weather conditions, various institutional arrangements, and differences attributable to non-moveable holidays. All seasonal adjustment factors are subject annually to relatively minor changes when conditions warrant them. The PMI® is a composite index based on the diffusion indexes of five of the indexes with equal weights: New Orders (seasonally adjusted), Production (seasonally adjusted), Employment (seasonally adjusted), Supplier Deliveries (seasonally adjusted), and Inventories. Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. A PMI® reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. A PMI® above 42.8 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 42.8 percent, it is generally declining. The distance from 50 percent or 42.8 percent is indicative of the extent of the expansion or decline. With some of the indicators within this report, ISM® has indicated the departure point between expansion and decline of comparable government series, as determined by regression analysis. The Manufacturing ISM® Report On Business® survey is sent out to Manufacturing Business Survey Committee respondents the first part of each month. Respondents are asked to report on information for the current month for U.S. operations only. ISM® receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses in order to give the most accurate picture of current business activity. ISM® then compiles the report for release on the first business day of the following month. The industries reporting growth, as indicated in the Manufacturing ISM® Report On Business® monthly report, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease. Responses to Buying Policy reflect the percent reporting the current month's lead time, the approximate weighted number of days ahead for which commitments are made for Capital Expenditures; Production Materials; and Maintenance, Repair and Operating (MRO) Supplies, expressed as hand-to-mouth (five days), 30 days, 60 days, 90 days, six months (180 days), a year or more (360 days), and the weighted average number of days. These responses are raw data, never revised, and not seasonally adjusted since there is no significant seasonal pattern. ISM ROB Content Except as explicitly and expressly permitted by ISM, you are strictly prohibited from creating works or materials (including but not limited to tables, charts, data streams, time-series variables, fonts, icons, link buttons, wallpaper, desktop themes, online postcards, montages, mashups and similar videos, greeting cards, and unlicensed merchandise) that derive from or are based on the ISM ROB Content. 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About Institute for Supply Management® The full text version of the Manufacturing ISM® Report On Business® is posted on ISM®'s website at www.ismrob.org on the first business day* of every month after 10:00 a.m. ET. The next Manufacturing ISM® Report On Business® featuring June 2020 data will be released at 10:00 a.m. ET on Wednesday, July 1, 2020. *Unless the New York Stock Exchange is closed.
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