The Institute for Supply Management said that its manufacturing index rose 1.3 points to 54, the best reading since May of 2022. This beat the highest estimates in Econoday’s survey of economists. The median expectation was for a reading of 53.4 percent.
The index of new orders, a closely watched measure of demand, signaled expansion for the fifth straight month and rose 2.7 percentage points to 54.3 percent in May. The production index rose nine-tenths of a point to 54.3 percent, the seventh consecutive month of expanding production.
Readings above 50 in the headline purchasing managers index indicate expansion for the manufacturing sector. Readings above 47 typically indicates the broader economy is growing.
The employment metric increased by 2.2 percentage points but remained in contraction. About half of the companies responding to the ISM survey indicate they are hiring and half “managing headcount.”
Nearly every part of the U.S. manufacturing sector expanded in May. ISM said that 16 of the 17 sub-sectors it tracks reported growth, including printing, textiles, electronic equipment, and appliances. Only one—wood products—contracted.
The prices index declined from April but still indicates rising prices for inputs.
Imports and exports expanded in May. ISM’s measure of inventories rose to a one-year high, perhaps indicating precautionary stockpiling due to concerns about supply-chain disruptions related to the was with Iran.
Separately, S&P Global said its measure of the manufacturing sector also showed “a sharp and stronger improvement” in May. New orders rose and output growth climbed to the highest level since October 2022. S&P cautioned that the increased activity seems linked to stockpiling.
“At first glance, the manufacturing sector seems to be firing on all cylinders but lift the hood and the picture is not so clear,” Chris Williamson of S&P Global said. “The headline PMI has hit a four-year high, with strong factory production growth for a second successive month in response to a further marked upturn in order books, but since the outbreak of war in the Middle East we have seen production and demand buoyed by stock building as companies worry over rising prices and supply difficulties.”
S&P Global said manufacturing input costs rose at a rate unmatched in nearly four years and supplier delivery times deteriorated to the greatest extent since August 2022.
Diverging from the ISM survey, S&P Global said its data signaled an increase in hiring to the best level in five months. It described the rate of job creation as “only modest.”
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