Manufacturing Down While Services Bounce Back, According to ISM

By at 5 June, 2024, 2:00 pm

by Raymond J. Keating –

The Institute for Supply Management’s purchasing managers indexes pointed to manufacturing contracting, again, in May, while services bounced back from a decline in April to growth in May.

The latest ISM Manufacturing PMI pointed to the grim stretch on U.S. manufacturing having continued in May 2024.

The manufacturing PMI came in at 48.7 percent in May, which was down 0.5 percentage point from April’s 49.2 percent. The manufacturing PMI has contracted in 18 of the last 19 months. The following chart from the Institute for Supply Management shows the ills of the past 12 months.

By the way seven manufacturing sectors reported growth in May – i.e., Printing & Related Support Activities; Petroleum & Coal Products; Paper Products; Textile Mills; Primary Metals; Fabricated Metal Products; and Chemical Products – and seven reported contraction – i.e., Wood Products; Plastics & Rubber Products; Machinery; Computer & Electronic Products; Furniture & Related Products; Transportation Equipment; and Food, Beverage & Tobacco Products.

Is there a positive in this manufacturing PMI report? Well, at least it doesn’t point to a recession, as a reading below 42.5 percent indicates recession.

Meanwhile, after declining in April, the ISM Services PMI returned to growth in May. The April contraction had been the first decline since December 2022. The services PMI registered 53.8 percent in May, which was up from 49.4 percent in April. According to this measure, the services sector has expanded in 46 of the last 48 months.

The 13 sector growing in May were Real Estate, Rental & Leasing; Health Care & Social Assistance; Other Services; Educational Services; Utilities; Wholesale Trade; Construction; Transportation & Warehousing; Public Administration; Management of Companies & Support Services; Finance & Insurance; Information; and Professional, Scientific & Technical Services. Meanwhile, five sectors declined – Retail Trade; Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Accommodation & Food Services; and Mining.

It’s notable that retail trade was a services sector declining.

Overall, the May ISM readings point to a sluggish economy, at best.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist and The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.


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