- The ISM manufacturing index fell to 52.1 in May from 52.8 in April, below market expectations for a slight increase to 53.
- The underlying details of the report were mixed. The production sub-index fell to 51.3 (from 52.3), backlog of orders fell to 47.2 (from 53.9), supplier deliveries fell to 52.0 (from 54.6), and inventories fell to 50.9 (from 52.9). On the other hand, the new orders index rose to 52.7 (from 51.7), and employment rose to 53.7 (from 52.4).
- On the trade front, new export orders moved back to expansionary territory (51.0 from 49.5), while imports slid further to 49.4 (from 49.8).
- The prices paid index rose 3.2 percentage points to 53.2 in May.
Key Implications
- Manufacturing activity has slowed considerably over the past several months as the U.S. “catches down” to its global peers. On the bright side, it remains in expansionary territory, which is more than can be said for manufacturing activity in America’s major trading partners. Europe (including Germany), Canada, Japan all have manufacturing PMI’s in contractionary territory. China, meanwhile, is barely growing with a PMI of 50.2.
- Even before the administration’s recent threat to impose tariffs on all Mexican imports, businesses had been complaining about delays at the southern border as weighing on activity. The threat of escalating tariffs on Mexico is a big deal, and, if followed through will impose significant costs on consumers and businesses and likely lead to further disruptions in American manufacturing activity.
