TEMPE, Ariz .- Manufacturing growth again beat expectations as it continued its four-month trend in May, while the overall economy grew for the 67th month, according to the Institute for Supply Management (ISM) on Friday.
The PMI for May was 55, up from April’s 54.7. Economists expected a decline to 54.
“Manufacturing expanded in May as the PMI rose to its highest level in the last 12 months,” commented Norbert J. Ore, C.P.M., chair of the ISM Manufacturing Business Survey Committee. “The ISM Inventories Index indicates that manufacturers are now in their 10th month of inventory reduction. A major concern of respondents is the rate of price increases covering a wide variety of commodities.”
Ore notes that manufacturers are feeling heavy price pressures from oil. Most have factored $60/barrel into their energy costs, but if prices continue to rise, there will be a second round of price increases.
New orders rose from 58.5 in April to 59.6 and production increased one point to 58.3.
Employment for May was 51.9, down from April’s 53.1.
Supplier deliveries and inventories remained relatively unchanged at 50.3 and 46.1, respectively. Backlogs of orders slipped two points to 52.5.
Prices dipped two points to 71.
Exports increased 2 points to 59 as imports decreased 0.5 to 57.5.
The top industries reporting growth in May include: Nonmetallic Mineral Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Chemical Products; Petroleum & Coal Products; Computer & Electronic Products; Miscellaneous Manufacturing; Transportation Equipment; Machinery, Wood Products; Textile Mills; and Electrical Equipment, Appliances & Components.
While no commodities were recorded in short supply, aluminum, aluminum extrusions, chemicals, copper, copper-based products, corrugated containers, flour, fuel, gasoline, natural gas, nickel, petroleum, petroleum-based products, plastic resins, stainless steel and steel all saw price increases.
The metals prices add to the price pressures from oil, making it difficult to offset them with productivity, Ore added.
“Today’s ISM report is consistent with other recent data showing a mid-year rebound in manufacturing,” said Thomas J. Duesterberg, President and Chief Executive Officer of the Manufacturers Alliance/MAPI. “Growth is being spurred by strength in high technology goods, mining and material handling equipment, aerospace products, and capital goods for new plants. Additionally, exports to rapidly-expanding markets around the world are helping U.S. production.
“Inventory rebuilding should help economic growth in the second half of 2007,” he added. “While still increasing, prices for commodity inputs such as metals and energy are moderating.”