May Institute for Supply Management

There are no signs of recession according to the indices produced by the Institute for Supply Management.  In fact, both sides of the economy accelerated in May according to their data.  Manufacturing increased to 55.4 from 54.9 (any reading over 50 suggests expansion) and the services indicator improved to 56.3 from 55.2 in April.

Many of manufacturing’s components were strong in the report.  New orders and production grew at a faster pace in May.  Orders should lead to additional output in the future, and production should hit GDP in the current quarter.  Employment grew but did so at a slower pace.  It appears that hiring within the printing industry is growing faster than any other segment within manufacturing.  (Insert central bank joke here)

Three of the four components that make up the non-manufacturing index improved at a faster pace in May.  Business activity and new orders expanded faster than in the prior period and each has grown for 58 consecutive months.  Construction led the activity index higher.   Employment accelerated in the month and is higher for the third month in a row as the category of arts, entertainment & recreation grew the fastest.   Supplier deliveries were the only component not improving but were unchanged.

In all, the economy appears to be on firm footing for the moment.  America’s trajectory is not stellar, but at least it remains above the horizon.  This indicator is released each month, so it can give us clues into the state of the economy before GDP figures from the government are released each quarter.  For now, it appears that the negative growth rate of the first quarter will not be repeated in the second.              (by C. Cox)