Two surveys released Wednesday offered vastly different takes on the current state of manufacturing in the United States.
According to Markit’s seasonally adjusted U.S. Manufacturing Purchasing Managers’ Index (PMI), momentum slowed across the board in May, as new work slumped to its weakest level so far in 2016 and production volumes fell for the first time in almost seven years.
To that end, Markit put May’s PMI at 50.7, relatively flat compared to the 50.8 recorded in April and only just scraping above the 50 waterline that indicates an increase in activity. Survey respondents blamed “subdued client demand and heightened economic uncertainty,” while anecdotal evidence suggested efforts to rein in inventory buildup had negatively influenced production schedules.
With that being said, manufacturing payroll numbers inched up slightly from April’s near three-year low, which respondents said was down to new product launches and longer-term expansion plans.
“The survey data indicate that factory output fell in May at its fastest rate since 2009, suggesting that manufacturing is acting as a severe drag on the economy in the second quarter. Payroll numbers are under pressure as factories worry about slower order book growth, in part linked to falling export demand but also as a result of growing uncertainty surrounding the presidential election,” Chris Williamson, chief economist at Markit, said. “For those looking for a rebound in the economy after the lackluster start to the year, the deteriorating trend in manufacturing is not going to provide any comfort.”
An alternative reading on U.S. manufacturing was offered by the Institute for Supply Management (ISM), which said that PMI rose to 51.3 in May, an increase of 0.5 percentage points from 50.8 in April but that employment remained unchanged at 49.2.
Bradley Holcomb, who oversees the ISM survey, said that manufacturing registered growth for the third straight month in May, as 14 of the 18 industries covered by the survey reported an uptick in new orders and 12 reported an increase in production. U.S. textile mills were among those industries reporting growth in May, while apparel, leather and allied products contracted.
The report also pointed out that prices rose yet again: The ISM Price Index increased 4.5 percentage points to 63.5, indicating an increase in raw materials for the third consecutive month as 34 percent of respondents reported paying higher prices, including apparel, leather and allied products. Textile mills, however, reported that pricing pressures had diminished.