May ISM Report: Manufacturing PMI Hits Highest Reading Since May 2022

The ISM (Institute for Supply Management) Manufacturing PMI reached 54% in May, the highest reading since May 2022 and the fifth consecutive month of expansion. The PMI grew 1.3 points month over month, signaling growth at a faster rate when compared to April.

“Of the five subindexes that make up the PMI, the new orders index indicated faster growth compared to the previous month, the supplier deliveries index stayed the same, the production index grew at a faster rate and the employment and inventories indexes remained in contraction, though both improved,” says Susan Spence, chair of the ISM’s manufacturing business survey committee. A reading below 50% represents contraction.

The new orders and production indexes remained in expansion territory, growing 2.7 and 0.9 points, respectively. The employment index grew 2.2 points to 48.6%, indicating contraction at a slower rate.

“Three of four demand indicators (the new orders, backlog of orders and new export orders indexes) were in expansion. The customers’ inventories index remains in ‘too low’ territory, contracting at a slower rate. A ‘too low’ status for the customers’ inventories index is usually considered positive for future production,” says Spence.

16 manufacturing industries reported growth last month:

• Printing & related support activities
• Textile mills
• Nonmetallic mineral products
• Paper products
• Electrical equipment, appliances & components
• Plastics & rubber products
• Primary metals
• Miscellaneous manufacturing
• Computer & electronic products
• Furniture & related products
• Machinery
• Transportation equipment
• Petroleum & coal products
• Chemical products
• Fabricated metal products
• Food, beverage & tobacco products

“All of the six largest manufacturing industries expanded in May, in the following order: computer & electronic products; machinery; transportation equipment; petroleum & coal products; chemical products; and food, beverage & tobacco products,” says Spence.

Survey comments were largely negative , with many respondents citing concerns surrounding the Iran conflict, tariff uncertainty, supply chain disruptions and rising costs.

“As with all companies, we have felt the effects of fuel-related inflation and general market uncertainty due to overall economic variability and geopolitical events that have impacted such markets as construction, automotive and agriculture, as well as the general industrial sector,” writes one respondent in the chemical products sector.

Another respondent in the food, beverage & tobacco products sector writes, “Cost of diesel is having huge impacts on our profitability. Confusion abounds around tariff refunds. We purchase many imported goods but in most cases are not the importer of record, so it is currently unclear to what we may be entitled.”