ISM: expansion gains, price pressures rise again in May

The overall economy grew for the 109th straight time, the Institute for Supply Management reported Friday.

According to the ISM's monthly report on business, the ISM index increased to 58.7 in May from 57.3 in April.

Economists polled by IFR Markets predicted the index would be 58.0.

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An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion. A reading of 50 shows the sector was unchanged in the month.

The prices paid index increased to 79.5 from 79.3, indicating higher raw materials prices for the 27th consecutive month. The employment index grew to 56.3 from 54.2.

The production index climbed to 61.5 from 57.2, the new orders index gained to 63.7 from 61.2; the supplier deliveries index rose to 62.0 from 61.1; the export orders index slid to 55.6 from 57.7; and the imports index dropped to 54.1 from 57.8.

The inventories index fell to 50.2 from 52.9; the customers' inventories index decreased to 39.6 from 44.3; and backlog of orders rose to 63.5 from 62.0.

Respondents' comments included:

  • “We are currently overselling our forecast and don’t see an end to the upswing in business. We are very concerned, however, about the tariffs proposed in Section 301 and are focusing on alternatives to Chinese sourcing.” (Transportation Equipment)
  • “Very difficult to hire skilled and unskilled labor.” (Food, Beverage & Tobacco Products)
  • “We are concerned about the strong dollar affecting our export orders as well as the steel tariffs, which are causing domestic steel prices to rise.” (Fabricated Metal Products)
  • “Strong demand from (agricultural) business; solid demand in all other business segments.” (Chemical Products)
  • “Sales remain strong. Lead times and direct material costs are soaring.” (Machinery)
  • “Suppliers are seeing price increases and trying to pass them on.” (Miscellaneous Manufacturing)
  • “Continued talk around steel tariffs has resulted in price increases for domestic line pipe, while HRC seems to be moving sideways. Temporary exemptions for allies and an agreement with South Korea have not calmed the market.” (Petroleum & Coal Products)
  • “Growth seems to be coming in the construction industry, but at a slower pace than expected with delays due to weather in the U.S. Business in (Latin America) is way up, and Canada is off to a decent start.” (Nonmetallic Mineral Products)
  • “Industry demand is causing price increases. Fuel prices are also on the rise, and there have been (price) increases associated with that.” (Primary Metals)
  • “Severe allocation, long lead times and upward price pressure, particularly in the electronic components market, continue to hamper our ability to meet customer demand and our shipping schedule.” (Computer & Electronic Products)
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Economic indicators Manufacturing industry
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