May’s Manufacturing

May’s manufacturing index from the Institute for Supply Management (ISM) notched its tenth consecutive month of growth although the pace at which it is occurring slowed slightly.  Coming off a robust 60.4 reading in April, the manufacturing index furthered its progress with a reading of 59.7.  New orders, which provide an insight into future production, continued to advance rapidly, the third monthly increase in a row, at 65.8.  Inventories contracted for the sixth of the last seven months as May posted a 45.6 level for this sector of the report, the lowest reading since December, 2009.  April had similar new orders and inventory figures, providing a perfect environment for production in May and it swelled above 60 as well, the third month of robust growth for this component.  Since workers are needed to fill more new orders and to rebuild shrinking inventories, employment growth hit its highest point since May 2006.  There is also a non-manufacturing component included separately in the ISM indicator.  While it is not as sensitive to the business cycle, it represents a larger portion of our economy and is worth considering.  This report also points to growth, matching April’s rate of expansion at a reading of 55.4,  indicating more purchasing managers reported higher activity than those reporting lower.   One point worth noting is that the employment component here moved above the break-even mark of 50 for the first time this cycle.  It did not blow past 50 but came in at 50.4.  This could still prove to be significant though, since about four-fifths of the jobs in this country come from industries outside of manufacturing.