EmailThe latest ISM report confirmed the views from the regional manufacturing surveys that the manufacturing sector expansion has slowed considerably nationwide. The ISM Index fell from 60.4 in April to 53.5 in May. The Briefing.com consensus expected the ISM to fall to 57.6.
The ISM is now at its lowest level since September 2009.
While all of the sub-indices in the ISM Index softened in May, every index remained above the 50.0 expansion/contraction threshold with the exception of inventories. That index fell from 53.6 in April to 48.7 in May.
The production index fell from 63.8 in April to 54.0 in May due to a slowdown in new orders (to 51.0 from 61.7) and a decrease in backlog growth (to 50.5 from 61.0). If new orders do not pick up next month, there is a significant probability that the ISM enters its first month of contraction since July 2009.
The recent slide in the ISM Index does not necessarily represent the start of a long-term trend. The automobile sector, and many other manufacturing sectors, have experienced supply disruptions following the earthquake and tsunami in Japan. It is possible the deceleration in manufacturing is temporary and will rev back up once Japanese production returns.
