Manufacturing contracted in May, but at a slowing rate. On Monday, the Institute for Supply Management issued its manufacturing index for May. The index was up to 43.1, from 41.5 in April, indicating that the sector might be stemming the bleeding after weeks of near economic standstill.
May marks the third month in a row in which the index registered below 50. An index number over 50 indicates growth in the manufacturing sector, while anything less than 50 indicates contraction. Prior to March of 2020, the index stayed above 50 for 131 months in a row.
‘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,’ Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee, said in a statement.
The ISM looks at 18 different manufacturing sectors. Of these, six grew in May, with minerals and furniture production showing the greatest improvement. Eleven industries declined, led by printing, primary metals, and transportation equipment. Food and beverage was the only ‘big six’ sector to report expansion. New orders, production, hiring, and export orders all shrank in May.
There’s been plenty of poor economic indicators this spring. Durable goods orders, a different economic metric, declined by 16.6% annually in March before falling by 17.2% in April. First quarter GDP fell by 5.0% and is all but guaranteed to be atrocious in Q2. Like a first flower after winter, the ISM numbers might be a leading indicator that things are finally starting to turn around.