PMI Shows Manufacturing Declining Slightly

The Institute for Supply Management released their monthly Manufacturing ISM Report on Business. The Purchasing Managers' Index (PMI) came in at 49.6% for May which was 1% higher than April.

A PMI reading of 49.6% suggests that the manufacturing economy is barely contracting, while the general economy is growing. Per ISM:

"A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. A PMI in excess of 41.1 percent, over a period of time, generally indicates an expansion of the overall economy."

Here is what some of the respondents to the ISM survey are saying:

• "Higher prices, tighter supply, longer lead times, shrinking inventory (same as last month)." (Transportation Equipment)


• "Just two months ago we were cautiously optimistic, but now sales inquiries are coming in at a snail's pace." (Machinery)


• "Ethanol-driven agricultural commodity increases continue to pose major hurdles." (Food, Beverage & Tobacco Products)


• "Pricing is skyrocketing for chemicals." (Chemical Products)


• "Current forecast flat for Q2 through Q4 after dip in Q1." (Computer & Electronic Products)

The PMI reading is consistent with the other recent indicators. The economy may be at the brink of recession but is not in a full blown recession.

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