U.S. Manufacturing Stabilizing at Depressed Level, ISM Data Show
A closely watched measure of U.S. manufacturing rose in May for the first time in four months.
(Bloomberg) -- A closely watched measure of U.S. manufacturing rose in May for the first time in four months, suggesting the industry is beginning to stabilize at a depressed level after a pandemic-driven plunge.
The Institute for Supply Management said Monday that its gauge improved to 43.1 last month from an 11-year low of 41.5 in April. Readings below 50 indicate shrinking activity. The purchasing managers group’s gauges of production and factory employment edged up from multi-decade lows, while an index of orders rose after the largest single-month slump since 1951.
While the data indicate producers are beginning to claw their way back as states begin reopening battered economies, weak export markets, record unemployment and lean capital spending budgets pose significant challenges.
“I believe we can see or are at the bottom of the toboggan run, which is a positive for June in spite of May’s numbers,” Timothy Fiore, chairman of the ISM Business Survey Committee, said on a call with reporters. May was a transition month, and demand, output and employment should return to some extent in June, he said.
The median forecast in a Bloomberg survey of economists called for the ISM factory index to rise to 43.8 in May. Six industries, including food, paper, clothing and apparel, reported growth in May. Eleven industries reported activity shrank.
A separate report Monday showed U.S. construction spending in April fell by less than expected, indicating most of the sector was able to continue operating during the pandemic. Spending fell 2.9% from the prior month, compared with analyst estimates for a 7% decline, and was actually up 3% from April 2019.
The supply managers group’s index of new orders increased to 31.8 from an April reading of 27.1. Only four industries reported growth in bookings during May. The ISM’s production measure rose to 33.2 from 27.5.
Select ISM Industry Comments
“Despite the Covid-19 issues, we are seeing an increase of quoting activity. This has not turned into orders yet, but it is a positive sign.” -- Computer and Electronic Products
“Increased Covid-19 sales in the food business has really stressed our production capabilities.” -- Food, Beverage and Tobacco
“Returning to full production for automotive, ramp-up will still depend on speed of automotive start-ups. We have built up inventory to stock. Ready to ship.” -- Fabricated Metal Products
“We see a lot of positive signs, despite what’s going on. People seem to continue to be building and looking to projects for fall of 2020 and beyond. There is good optimism out there.” --Nonmetallic Mineral Products
The ISM’s gauge of factory inventories rose to a one-year high of 50.4, indicating slightly more elevated stockpiles that may limit production.
Meanwhile, the index of supplier deliveries fell for the first time since October, a sign that bottlenecks and transportation delays are finally beginning to ease.
©2020 Bloomberg L.P.
