May ISM Monthly Survey

The ISM manufacturing report which is produced by the Institute for Supply Management (ISM) and is based on a survey of purchasing and supply executives in approximately 400 industrial companies – came in today relatively optimistic.

In fact, the Institute for Supply Management’s manufacturing index increased to 49.6 in May from 48.6 in April, showing one percentage point in gains and ahead of consensus estimates for an expected drop to 48.5. The Production Index moved up as well, registering above 50 percent after declining for two months.

Worth noting is the report in terms of its relevance – it’s widely followed since it’s considered a forward-looking barometer of manufacturing activity, representing approx. 12% of the economy. It’s one of several key reports monitored by the Federal Reserve as it sets monetary policy.

Today’s monthly survey on the manufacturing sector still remains below the 50.0 level which many economists use as a gauge for expansion and contraction in the space. However, overall – the output components for entire index printed stronger figures than last month.

The Production Index increased to 51.2 percent in May, an increase of 2.1 percentage points from the 49.1 percent reported in April.

New Orders Index registered 49.7 percent in May, 3.2 percentage points higher than the 46.5 percentage points registered in April.

New Export Orders Index registered 59.5 percent in May, an increase of 2 percentage points. This is the 66th consecutive month of growth in the New Export Orders Index.

Employment Index registered 45.5 percent in May, which is an increase of 0.1 percentage point when compared to the 45.4 percent reported in April.

Today’s report continues to reinforce the notion we have been stressing for several months now of an economy that though at a slow pace, still continues to grow. The past relationship between the PMI and the overall economy as the report states: indicates that the average PMI for January through May (49.2 percent) corresponds to a 2.5 percent increase in real gross domestic product (GDP).

If the PMI for May (49.6 percent) is annualized, it corresponds to a 2.7 percent increase in real GDP annually. Our forecast, while the overall economy grew for the 79th consecutive month, remains of real GDP growth at a 1.5% rate in Q2 for fiscal ’08.

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About Ron Haruni 1068 Articles
Ron Haruni is the Co-Founder & Editor in Chief of Wall Street Pit.

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