U.S. Manufacturing Backlog Hits Highest Point Since 2004

Manufacturing expanded in May and the general U.S. economy grew for the 109th consecutive month, according to the nation’s supply executives in the latest Manufacturing ISM Report On Business. The April PMI registered at 58.7 percent, a 1.4  percent increase from the April reading of 57.3 percent.

The Report On Business measures its data using the Purchasing Manager’s Index (PMI), which is an indicator of economic health in the manufacturing sector. A reading above 50 percent indicates that the manufacturing economy is generally expanding, while below 50 percent indicates that it is generally contracting.

“This indicates strong growth in manufacturing for the 21st consecutive month, led by continued expansion in new orders, production and employment,” said Timothy R. Fiore, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee. “However, inventories are struggling to maintain expansion levels, and suppliers continue to deliver at essentially the same rate as the previous month, relative to production.”

“Comments from the panel reflect continued expanding business strength. Demand remains strong, with the New Orders Index at 60 or above for the 13th straight month, and the Customers’ Inventories Index remaining at very low levels,” Fiore continued. “The Backlog of Orders Index continued expanding, with its highest reading since April 2004, when it registered 66.5 percent.

“Consumption, described as production and employment, continues to expand in spite of labor and skill shortages. Inputs, expressed as supplier deliveries, inventories and imports, had expansion declines, due primarily to inventory reductions likely caused by supplier performance issues. Lead-time extensions, steel and aluminum disruptions, supplier labor issues, and transportation difficulties continue.

“Export orders expanded at slower rates. The Prices Index is at its highest level since April 2011, when it registered 82.6 percent. Demand remains robust, but the nation’s employment resources and supply chains continue to struggle. Respondents say price pressure at their companies is causing price-increase discussions as we prepare to enter H2,” Fiore said.

Of the 18 manufacturing industries, 16 reported growth in May, in the following order: Textile Mills; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Fabricated Metal Products; Furniture & Related Products; Machinery; Chemical Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Petroleum & Coal Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Transportation Equipment; Paper Products; and Primary Metals.

Commodities Up in Price

Aluminum; aluminum based products; brass; capacitors; caustic soda; cobalt; copper; corrugate; corrugated boxes; corrugated cartons; electrical components; freight; paper; resistors; galvanized steel; hot rolled steel; hot rolled plate steel; stainless steel; stainless steel bar; stainless steel sheet; steel based products; and wood.

Commodities Down in Price

None.

Commodities in Short Supply

Aluminum; capacitors; electrical components; electronic components; freight; memory; resistors; steel based products; and hot rolled steel.