US ISM Manufacturing PMI May 2024

Economic activity in the U.S. manufacturing sector faced contraction for the second consecutive month in May, marking the 18th time in the last 19 months, according to the latest Manufacturing ISM® Report On Business®.

The Manufacturing PMI® dipped to 48.7 percent in May, down 0.5 percentage points from April’s 49.2 percent. This decline reflects a continued struggle, with the New Orders Index slipping further into contraction at 45.4 percent, indicating a softening demand.

Production and Employment Show Growth

Despite the overall contraction, there were pockets of growth. Production maintained a slight expansion, registering 50.2 percent, although this was slightly lower than April’s figure. Employment showed a significant upturn, hitting 51.1 percent, a 2.5 percentage point increase from April, marking the first expansion after seven months of contraction.

This increase in employment could signal cautious optimism among manufacturers, potentially fueled by gradual improvements in market conditions and the easing of supply chain disruptions that had plagued the sector in recent months.

Supplier Deliveries Improve, Inventories Contract

Supplier deliveries, while still in contraction territory at 48.9 percent, showed stability compared to April. However, raw materials inventories continued to contract, indicating caution from companies amidst demand uncertainty. The slight improvement in supplier deliveries could be attributed to ongoing efforts to address supply chain bottlenecks and disruptions, which have been a persistent challenge for manufacturers.

Prices Increase Amidst Softening Demand

Prices for raw materials remained in strong expansion territory at 57 percent, although showing a slight easing from April. This increase in prices reflects ongoing inflationary pressures in the market, driven by factors such as supply chain disruptions, increased demand, and rising production costs.

Export and Import Dynamics

Export orders bounced back slightly, registering 50.6 percent, indicating a marginal improvement in demand from overseas customers. Imports continued to grow for the fifth consecutive month, albeit at a slower rate in May, with the Imports Index at 51.1 percent. This suggests that while domestic demand may be softening, manufacturers are still benefiting from robust international demand and are actively engaging in global trade.

Industry Insights and Concerns

• Printing & Related Support Activities: “While we saw modest growth this month, there are concerns about the sustainability of demand and pricing weakness.”
• Petroleum & Coal Products: “Our industry continues to show resilience amidst market challenges, with growth in both production and employment.”
• Chemical Products: “We experienced steady growth in May, although concerns remain about supply chain disruptions and rising input costs.”
• Transportation Equipment: “The contraction in new orders is concerning, and we are closely monitoring market conditions for any signs of improvement.”
• Computer & Electronic Products: “Despite challenges, we are cautiously optimistic about future growth opportunities in the tech sector.”
• Fabricated Metal Products: “We continue to face headwinds in the market, with softening demand impacting our production levels.”

In summary, while certain sectors showed resilience, the manufacturing sector faced ongoing challenges in May, highlighting the need for cautious optimism amidst fluctuating demand and pricing pressures. The uptick in employment and stable supplier deliveries provide some positive indicators, but continued vigilance and adaptation to changing market conditions remain crucial for manufacturers navigating the current economic landscape.