After a series of weaker than expected regional Fed surveys that showed contractionary business environments for the regions that covered, the release of the May ISM Manufacturing report bucked the trend. Not only did the headline index remain in growth territory (above 50), but it also exceeded economist expectations (50.3), rising to a level of 51.3 from last month’s reading of 50.8. After five straight months towards the end of 2015 and into early 2016, the headline ISM Manufacturing index has now been above 50 for three straight months.
Looking at the internals of the report gave a mixed picture. Of the ten components to the report, breadth was biased to the downside with three increases, four decliners, and three unchanged. The biggest decliners relative to April Backlog Orders (-3.5) and Production (-1.1), while the biggest increases came from Supplier Deliveries (+5.0), Prices Paid (+4.5), and Customer Inventories (+4.0). Relative to last May, the components were evenly split between gains and losses at five.
As mentioned above, on both a m/m and y/y basis, Prices Paid saw one of, if not, the largest increases. After these increases, the level for this component is now at 63.5, which is the highest level since June 2011.