ISM (CONT’D FROM PAGE 16)
“The Inventories Index registered 46.7 percent, down 4.1 percentage points compared to April’s reading of 50.8 percent. “The New Export Orders Index reading of 40.1 percent is 3 percentage points lower than the reading of 43.1 per- cent registered in April. The Imports Index plunged into ex- treme contraction in May, registering 39.9 percent, 7.2 per- centage points lower than April’s reading of 47.1 percent.” Spence continues, “In May, U.S. manufacturing activity slipped further into contraction after expanding only mar- ginally in February. Contraction in most of the indexes that measure demand and output have slowed, while inputs have started to weaken: “Demand indicators were mixed, with the New Orders and Backlog of Orders indexes contracting at slower rates, while the Customers' Inventories and New Export Orders indexes contracted more strongly. However, a ‘too low’ status for the Customers’ Inventories Index is usually con- sidered positive for future production. “Regarding output, the Production Index increased from an alarmingly low reading the previous month, but factory output continued to contract in May, indicating that panelists’ companies are still revising production plans downward amid economic uncertainty. “The Employment Index ticked up for a second consec- utive month but remained in contraction, as head-count reductions continued. Companies generally opted for lay- offs because they are quicker to implement than attrition. “Finally, inputs are defined as supplier deliveries, in- ventories, prices and imports. The Inventories Index, as expected, entered contraction territory after expanding as companies completed pull-forward activity ahead of tariffs, while the Supplier Deliveries Index indicated continuing slow performance, reflecting ongoing delays in clearing goods through ports of entry. “Tariffs-induced prices growth slowed slightly, while the Imports Index contracted significantly, down 7.2 percent- age points compared to April. “Looking at the manufacturing economy, 57 percent of the sector’s gross domestic product (GDP) contracted in May, up from 41 percent in April. The share of manufac- turing GDP registering a composite PMI calculation at or below 45 percent is a good metric to gauge overall man- ufacturing weakness; in May, this figure was 5 percent, a 13-percentage point decrease compared to the 18 percent in April,” says Spence. The seven industries reporting contraction in May, in order, are: Paper Products; Wood Products; Printing & Re- lated Support Activities; Food, Beverage & Tobacco Prod- ucts; Transportation Equipment; Chemical Products; and Primary Metals. “Uncertainty due to the recent tariffs continue to weigh on profitability and service. An unresolved (trade deal with) China will result in empty shelves at retail for many do-it- yourself and professional goods.”
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www.boardconvertingnews.com
June 9, 2025
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