The May ISM manufacturing index released by the United States on Wednesday (1st) rose to 56.1, which was better than market expectations of 54.5 and also higher than 55.4 in April, indicating that overall manufacturing activity has picked up, and commodity demand remains strong, which may further ease the economy. will fall into recession fears. However, one of the employment indexes fell to 49.6, down from the previous value of 50.9, the first contraction since November 2020.
May U.S. ISM manufacturing sub-index:
- The new orders index was reported at 55.1, the previous value was 53.5
- The production index was reported at 54.2, the previous value was 53.6
- The employment index was reported at 49.6, the previous value was 50.9
- The supplier delivery index was reported at 65.7, the previous value was 67.2
- The inventory index was at 55.9, the previous value was 51.6
- The client inventory index was reported at 32.7, the previous value was 37.1
- The price index reported 82.2, the previous value was 84.6
- The index of outstanding orders was reported at 58.7, the previous value was 56.0
- The export order index was reported at 52.9, the previous value was 52.7
- The import index of raw materials was reported at 48.7, the previous value was 51.4
Looking at the index items, the new orders index hit a 3-month high of 55.1, the production index rose moderately to 54.2, and the outstanding orders index also climbed to 58.7 from the previous month.
Among them, the inventory index rose to 55.9, significantly higher than the previous value of 51.6, an 11-month high, mainly because purchasing managers ensured that the company still has enough finished products on hand despite the challenging logistics environment.
At the same time, the client inventory index fell to 32.7 from the previous value of 37.1, the fastest decline in three months, explaining the impact of the increase in the new orders index and alleviating the market’s concerns about retailers’ overstocking of inventory.
Notably, the price index fell to 82.2 from 84.6 in April, supporting the view that inflation may have peaked, but remains at an all-time high.
U.S. manufacturing remains in a demand-driven, supply-chain-constrained environment, said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, adding that the market remains very optimistic about demand, with positive comments on growth in the majority.
The report also noted that capacity constraints in terms of labor, shipping delays and materials continued. The ISM employment index dipped below 50 points into contraction territory for the first time since November 2020, in what could be a potential red flag that companies will slow hiring, while the supplier deliveries index also retreated.
However, another April JOLTs job opening reported on the same day was at 11.4 million, in line with market expectations and down from a revised prior figure of 11.855 million.
The April JOLTs report showed the labor market remained tight, with job openings near record levels and corporate layoffs hitting record lows, said Robert Frick, a business economist at Navy Federal Credit Union. That guarantees a healthy nonfarm payrolls report on Friday (3rd) and means that despite high inflation and an imminent hike in interest rates, employers’ focus remains on expansion.