Manufacturing Settles in a Solid Pace of Expansion

Manufacturing Settles in a Solid Pace of Expansion

The ISM figures indicate manufacturing growth is staying robust even as expectations fade for a near-term fiscal boost, including through tax reform.

American factories are settling back into a solid pace of expansion after a post-election run-up that saw the Institute for Supply Management’s manufacturing gauge hit an almost three-year high, figures released on June 1 showed.

The Factory index little changed at 54.9 (est. 54.8) from 54.8 in April, however, ISM’s gauge of new orders increased to 59.5 from 57.5.  

Highlights of the report include:

  • The Production Index eased to 57.1 from 58.6.
  • A gauge of factory inventories was little changed at 51.5, while customer stockpiles barely shrank.
  • Order backlogs measure fell to 55 from 57 Index of prices paid dropped to 60.5 from 68.5.
  • The measure of export orders cooled to 57.5 in May from 59.5. Employment gauge increased to 53.5 from 52.

The ISM’s employment figures are consistent with projections that the Labor Department on June 2 will report a pickup in factory payrolls.

Factory managers have registered more optimism about conditions so far in 2017 amid steady domestic demand and global growth that looks more promising. >

Stable overseas demand is helping to keep a floor under export orders. The Chinese government’s Purchasing Managers’ Index showed expansion in May for a 10th month after shrinking in most of the prior 10 months.

The ISM figures indicate manufacturing growth is staying robust even as expectations fade for a near-term fiscal boost, including through tax reform, from Washington lawmakers.

“We’ve had some fairly strong months of positive employment activity in our report,” said Timothy Fiore, ISM manufacturing survey committee chairman. “It means that they’re still looking hard for people, and yes there may be some pressure on wages downstream.”

“There is some difficulty finding qualified people, and that may be reflected in what’s happening in the production number -- we had a slight decrease this month,” Fiore said.

By Michelle Jamrisko

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