United States: ISM manufacturing index picks up from 11-year low in May
June 1, 2020
The Institute for Supply Management (ISM) manufacturing index increased from 41.5 in April to 43.1 in May, virtually meeting market expectations of 43.0. Nevertheless, the index remained below the 50-threshold that separates contraction from expansion in the manufacturing sector. That being said, a reading above 42.8 typically indicates the overall economy expanded in May, despite a contraction in the manufacturing sector.
May’s result was driven by softer deteriorations in new orders, production and employment, but remained sharp nonetheless. Moreover, new export orders and backlogs of work also declined at a weaker pace in May relative to April.
Looking ahead, the manufacturing sector will likely remain subdued as anemic economic activity weighs on demand. Moreover, recent social unrest, which resulted in lockdown measures—unrelated to the virus outbreak—poses a downside risk to domestic demand for U.S. manufactured goods.
Author: Steven Burke, Economist