The Economy

ISM Manufacturing Index At Lowest Since June 2003

June 1, 2005

U.S. Consumer confidence, as measured by the New York-based Conference Board, increased nicely in May. Manufacturing, however, did not. Economic activity in the manufacturing sector of the U.S. economy just barely grew last month, says the Institute for ...

John McClenahen

U.S. Consumer confidence, as measured by the New York-based Conference Board, increased nicely in May. Manufacturing, however, did not.

Economic activity in the manufacturing sector of the U.S. economy just barely grew last month, says the Institute for Supply Management (ISM), Tempe, Ariz. Its manufacturing index for May was at 51.4%, 1.9 percentage points below April's 53.3%, four-tenths of a percentage point below the 51.8% economists generally expected and the lowest the index has been since its 50.4% in June 2003.

An index figure above 50% indicates the manufacturing sector generally is expanding; an index figure below 50% signals manufacturing is contracting.

Both new orders and production continued to grow last month, but more slowly than they had been. New orders fell two percentage points to 51.7% in May from 53.7% in April, and production fell 1.8 percentage points to 54.9% from 56.7%. Employment in manufacturing stopped growing after 18 months, falling 3.5 percentage points to 48.8% from 52.3%.

"The manufacturing sector is definitely slowing, and the question is whether a somewhat stronger [U.S.] dollar and the burden of high energy costs are slowly bringing this manufacturing growth cycle to an end," says Norbert J. Ore, the chair of ISM's manufacturing business survey committee.

Indeed, rising oil prices are affecting the growth rates of U.S. manufacturers, indicates a PricewaterhouseCoopers study released June 1. A majority -- 59% -- of the companies surveyed indicated they are passing along price increases, although 41% still reported shrinking gross margins during their most recent fiscal quarter. What's more, 47% of the 73 senior executives in large, multinational industrial companies PwC surveyed cited rising energy prices as a potential barrier to growth during the next 12 months.

"The industrial sector is in the midst of a classic mid-cycle inventory correction that is adjusting for slower growth in consumer spending and a continuing rise in the imported goods share of the manufacturing sector," says Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI, an Arlington, Va.-based business and public policy research group.

About the Author

John McClenahen | Former Senior Editor, IndustryWeek

John S. McClenahen, is an occasional essayist on the Web site of IndustryWeek, the executive management publication from which he retired in 2006. He began his journalism career as a broadcast journalist at Westinghouse Broadcasting’s KYW in Cleveland, Ohio. In May 1967, he joined Penton Media Inc. in Cleveland and in September 1967 was transferred to Washington, DC, the base from which for nearly 40 years he wrote primarily about national and international economics and politics, and corporate social responsibility.

      McClenahen, a native of Ohio now residing in Maryland, is an award-winning writer and photographer. He is the author of three books of poetry, most recently An Unexpected Poet (2013), and several books of photographs, including Black, White, and Shades of Grey (2014). He also is the author of a children’s book, Henry at His Beach (2014).

      His photograph “Provincetown: Fog Rising 2004” was selected for the Smithsonian Institution’s 2011 juried exhibition Artists at Work and displayed in the S. Dillon Ripley Center at the Smithsonian Institution in Washington, D.C., from June until October 2011. Five of his photographs are in the collection of St. Lawrence University and displayed on campus in Canton, New York.

      John McClenahen’s essay “Incorporating America: Whitman in Context” was designated one of the five best works published in The Journal of Graduate Liberal Studies during the twelve-year editorship of R. Barry Leavis of Rollins College. John McClenahen’s several journalism prizes include the coveted Jesse H. Neal Award. He also is the author of the commemorative poem “Upon 50 Years,” celebrating the fiftieth anniversary of the founding of Wolfson College Cambridge, and appearing in “The Wolfson Review.”

      John McClenahen received a B.A. (English with a minor in government) from St. Lawrence University, an M.A., (English) from Western Reserve University, and a Master of Arts in Liberal Studies from Georgetown University, where he also pursued doctoral studies. At St. Lawrence University, he was elected to academic honor societies in English and government and to Omicron Delta Kappa, the University’s highest undergraduate honor. John McClenahen was a participant in the 32nd Annual Wharton Seminars for Journalists at the Wharton School at the University of Pennsylvania in Philadelphia. During the Easter Term of the 1986 academic year, John McClenahen was the first American to hold a prestigious Press Fellowship at Wolfson College, Cambridge, in the United Kingdom.

      John McClenahen has served on the Editorial Board of Confluence: The Journal of Graduate Liberal Studies and was co-founder and first editor of Liberal Studies at Georgetown. He has been a volunteer researcher on the William Steinway Diary Project at the Smithsonian Institution, Washington, D.C., and has been an assistant professorial lecturer at The George Washington University in Washington, D.C.