KPI – June 2024: State of Manufacturing

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Economic activity in the manufacturing sector contracted in May for the second consecutive month and the 18th time in the last 19 months, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®. The Manufacturing PMI® registered 48.7% in May, down 0.5 percentage point from 49.2% a month prior.

“U.S. manufacturing activity continued in contraction after growing in March, the first expansion for the sector since September 2022,” says Timothy R. Fiore, CPSM, C.P.M., chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. “Demand was soft again, output was stable and inputs stayed accommodative.”

According to Fiore, “demand remains elusive,” as companies are less likely to invest due to current monetary policy and other conditions. Such investments include supplier order commitments, inventory building and capital expenditures. In May, production execution continued to expand but was essentially flat compared to prior month. He also noted suppliers have capacity, with lead times improving and shortages less severe.

“[Approximately] 55% of manufacturing gross domestic product (GDP) contracted in May, up from 34% in April. More importantly, the share of sector GDP registering a composite PMI® calculation at or below 45% – a good barometer of overall manufacturing weakness – was 4% in May, the same as in April but an indication of better health than the 27% recorded in January,” Fiore explains.

“Among the top six industries by contribution to manufacturing GDP in May, none had a PMI® at or below 45%,” he continues.


Caption: While the Ford F-series is soft in monthly sales, the Toyota RAV-4 and Honda CR-V are performing well – up 26.7% and 11%, respectively. 

Important Takeaways, Courtesy of the Manufacturing ISM® Report On Business®:

  • Decreased demand was reflected by the (1) New Orders Index dropping deeper into contraction, supported by additional comments regarding softening; (2) New Export Orders Index edging back into marginal expansion; (3) Backlog of Orders Index regressing lower into contraction territory; and (4) Customers’ Inventories Index at the “just right” level, neutral for future production. 
  • Output (measured by the Production and Employment indexes) advanced compared to April, with a combined 1.4-percentage point upward impact on the Manufacturing PMI® calculation. Data confirms that panelist companies did maintain production levels, but headcount reductions continued month-over-month.
  • Inputs – defined as supplier deliveries, inventories, prices and imports – continued to accommodate future demand growth. 
  • The Supplier Deliveries Index was stable, while the Inventories Index was marginally lower compared to April. 
  • While the Prices Index eased, it remained in strong expansion (or ‘increasing’) territory, as most commodity driven costs continue to climb but at weaker rates. Imports continued to grow but at a slower rate in May.

Pat Curtin

Pat Curtin is the managing editor of THE SHOP magazine.

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