Manufacturing growth slows in May

June 4, 2012
Though the PMI was down slightly for the month, new orders continued their steady growth clip and raw materials prices fell for the first time since December 2011

U.S. purchasing managers maintain their generally optimistic view of the manufacturing economy, reporting continued growth in the sector in May.

Released June 1, the Institute for Supply Management’s Manufacturing Report on Business revealed a PMI of 53.5, down a modest 1.3% from April’s reading of 54.8. The May report signals continued expansion in the manufacturing sector; a PMI above 50 indicates growth and a PMI below 50 indicates contraction.

Executives polled for the report say they expect stable-to-strong orders ahead and have seen steadily improving sales over the first five months of 2012. ISM’s May New Orders Index grew for the 37th straight month, rising almost 2% to 60.1—its highest level in more than a year. There was also good news on pricing: ISM’s Prices Index for raw materials fell to 47.5 in May, dropping nearly 14 percentage points from April and indicating lower prices for the first time since last December.

In other key indicators, ISM’s production index remained strong but slowed considerably from April, the backlog of orders remained below 50, and employment was down slightly but still above the growth threshold, at 56.9.

The mixed results indicate consistent and stable growth in manufacturing, but raise questions about how long the sector can remain unaffected by larger, global economic concerns.

“Amidst escalating concerns about economic activity in virtually every major region of the world, the U.S. manufacturing sector, while slowing, appears to be maintaining consistent and stable growth,” economist Cliff Waldman of the Manufacturers Alliance for Productivity and Innovation said in a statement analyzing the results.

Commenting on the employment index in particular, he added: “The jobs report for May is strong evidence that the U.S. economy can’t entirely remain an island in a sea of troubles. Nonetheless, the fact that U.S. manufacturing has now had positive job growth in all but two months since January 2010 is a good sign for the capacity of the factory sector to provide at least some support for a stumbling U.S. economy, even if manufacturing cannot completely escape the growing risk of a global recession.”

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About the Author

Victoria Fraza Kickham | Distribution Editor

Victoria Kickham is the distribution editor for Electronic Design magazine, SourceESB and, where she covers issues related to the electronics supply chain. Victoria started out as a general assignment reporter for several Boston-area newspapers before joining Industrial Distribution magazine, where she spent 14 years covering industrial markets. She served as ID’s managing editor from 2000 to 2010. Victoria has a bachelor’s degree in English from the University of New Hampshire and a master’s degree in English from Northeastern University.