After two straight months of declines raised some serious questions about the post-election rebound in the manufacturing sector, the May ISM Manufacturing report provided a little comfort. While economists were forecasting a slight decline to 54.7 in the headline index, the actual reading showed a modest increase, rising from 54.8 to 54.9.
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Of the 18 industries surveyed in May, just two reported a decline in business relative to April, and both of those are associated with the apparel industry (Apparel, Leather & Allied Products; and Textile Mills). As far as the commentary was concerned, once again it was positive this month. As shown in the highlights below, two themes that stand out are that business remains solid and labor markets are tight.
Breaking out this month’s report by each of its components, the table below shows the m/m and y/y changes in each component. Despite the fact that the headline index increase versus February, breadth in this month’s report was skewed to the downside with six components declining and just four increasing. The biggest increase this month was in Customer Inventories, while Prices Paid saw the largest decline and its largest m/m decline since November 2014. The decline in prices was also evident in the fact that the net number of commodities rising in price (8) was the lowest since December.