Photographer: Luke Sharrett/Bloomberg

Manufacturing in U.S. Settles In at Solid Pace of Expansion

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American factories are settling back into a solid pace of expansion after a post-election run-up that saw the Institute for Supply Management’s manufacturing gauge hit an almost three-year high, figures released Thursday showed.

Highlights of ISM Manufacturing (May)

  • Factory index little changed at 54.9 (est. 54.8) from 54.8 in April; readings above 50 indicate growth
  • ISM’s gauge of new orders increased to 59.5 from 57.5
  • Measure of production eased, while employment index picked up
  • 15 of 18 manufacturing industries reported growth

Key Takeaways

Stronger orders growth represents resilient sales that will keep manufacturing driving forward. Factory managers have registered more optimism about conditions so far in 2017 amid steady domestic demand and global growth that looks more promising. The ISM’s employment figures are consistent with projections that the Labor Department on Friday will report a pickup in factory payrolls.

Stable overseas demand is helping to keep a floor under export orders. The Chinese government’s Purchasing Managers’ Index showed expansion in May for a 10th month after shrinking in most of the prior 10 months.

The ISM figures indicate manufacturing growth is staying robust even as expectations fade for a near-term fiscal boost, including through tax reform, from Washington lawmakers.

Official’s View

“We’ve had some fairly strong months of positive employment activity in our report,” Timothy Fiore, ISM manufacturing survey committee chairman, said on a conference call with reporters. “It means that they’re still looking hard for people, and yes there may be some pressure on wages downstream.”

“There is some difficulty finding qualified people, and that may be reflected in what’s happening in the production number -- we had a slight decrease this month,” Fiore said.

Other Details

  • Measure of export orders cooled to 57.5 in May from 59.5
  • Employment gauge increased to 53.5 from 52
  • Production index eased to 57.1 from 58.6
  • A gauge of factory inventories was little changed at 51.5, while customer stockpiles barely shrank
  • Order backlogs measure fell to 55 from 57
  • Index of prices paid dropped to 60.5 from 68.5
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