The production index dropped 1 point to 51.3 in May, the lowest level since August 2016. In addition, other PMI components declined: the supplier deliveries index was down 2.6 points to 52; and the inventories index fell 2 points to 50.9. Meanwhile, increases were seen in new orders (up 1 point to 52.7), employment (up 1.3 points to 53.7), and prices (up 3.2 points to 53.2).
“Comments from the panel reflect continued expanding business strength, but at soft levels consistent with the early-2016 expansion. Demand expansion continued, with the New Orders Index strengthening, but remaining in the low 50s, the Customers’ Inventories Index remaining at a ‘too low’ level, and the Backlog of Orders Index contracting for the first time since January 2017. Consumption (production and employment) continued to expand, resulting in a combined PMI contribution of 0.3 percentage point. Inputs — expressed as supplier deliveries, inventories and imports — were lower this month, primarily due to inventory softening and supplier’s continuing to deliver faster, resulting in a combined 4.6-percentage point reduction in the Supplier Deliveries and Inventories indexes. Imports contracted for the second straight month. Overall, inputs reflect supply chains’ ability to respond faster and indicate that supply managers are closely watching inventories. Prices remain at a relatively stable level.
“Respondents expressed concern with the escalation in the U.S.-China trade standoff, but overall sentiment remained predominantly positive. The PMI continues to reflect slowing expansion,” says Fiore.
Of the 18 manufacturing industries, 11 reported growth in May, in the following order: Printing & Related Support Activities; Furniture & Related Products; Plastics & Rubber Products; Textile Mills; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Chemical Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; and Machinery. The six industries reporting contraction in May — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Petroleum & Coal Products; Wood Products; Paper Products; and Fabricated Metal Products.