After two straight months of declines, the ISM Manufacturing report bounced back nicely in May, rising from 57.3 up to 58.7 and above the consensus forecast for an increase to 58.2.  While the index is off of its recent highs, relative to history, it is still at very high levels.

Not only was the headline reading positive, but breadth was also strong.  As shown in the table below, six of the index’s ten sub-components were up m/m and seven were up y/y.  The biggest m/m gains this month came from Production and New Orders, while the largest declines were in Customer Inventories and Import Orders.  In the case of Customer Inventories, that index is at its lowest level since December 2010.  Also notable is the trend in Backlog Orders.  Even though it didn’t see one of the largest increases, that index is now at its highest level since April 2004!  Finally, with just about everyone concerned about inflation these days, Prices Paid did increase to its highest level since 2011, but the pace of increase definitely slowed.

Finally, with respect to what the respondents are saying, the table below is from this month’s release and shows that while business remains very strong (green highlights), concerns about rising prices are more than present.

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