United States: U.S. manufacturing sector gains some momentum in May

An increase in the ISM manufacturing index in May was a positive surprise, but still signals tepid growth in the sector. The indicator rose from 50.8 in April to 51.3 in May and also came in above the 50.4 the markets had expected. The ISM indicator continued to suggest expansion in the manufacturing sector—it sits above 50—but the mild increase over the previous months suggests the sector is unlikely to speed up any time soon.

The underlying details suggest that May’s reading reflected that supply delivery times improved notably over the previous month. Meanwhile, new orders and employment remained virtually unchanged, while manufacturing production in May softened for a second consecutive month. Inventories dropped slightly again in May, which suggests that the sector’s inventory excess has not fully cleared.

FocusEconomics Consensus Forecast panelists expect that industrial production will increase 0.8% in 2016, which is down 0.4 percentage points from last month’s forecast. For 2017, panelists see industrial production expanding 2.4%.