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Huge Miss in May ISM; Manufacturing Now in Contraction; What the Numbers Mean

US Manufacturing as measured by the May 2013 Manufacturing ISM Report On Business® is treading water barely above contraction.

Economic activity in the manufacturing sector contracted in May for the first time since November 2012, and the overall economy grew for the 48th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

ISM at a Glance

Series Data Apr Index Mar Index Percentage
Point Change
Direction Rate of Change Trend (Months)
PMI™ 49.0 50.1 -1.7 Contracting From Growing 1
New Orders 48.8 52.3 -3.5 Contracting From Growing 1
Production 53.5 52.2 +1.3 Contracting From Growing 1
Employment 50.1 50.2 -0.1 Growing Slower 44
48.7 50.9 -2.2 Faster From Slowing 1
Inventories 49.0 46.5 +2.5 Contracting Slower 3
Customers' Inventories 46.0 44.5 +1.5 Too Low Slower 18
Prices 49.5 50.0 -0.5 Decreasing From Unchanged 1
of Orders
48.0 53.0 -5.0 Contracting From Growing 1
Exports 51.0 54.0 -3.0 Growing Slower 6
Imports 54.5 55.0 -0.5 Growing Slower 4


Last month I stated "Manufacturing employment has grown for 43 months. I expect that trend to break next month. Production was up but inventories were way lower. The drop in inventories, in conjunction with a big slowdown in employment, is likely a leading indicator of future production. The positive surprise that does not fit into the above assessment is that new orders grew at a faster rate. Next month may be telling. I expect the new order divergence to resolve to the downside as the global economy and the US economy are both slowing."

The consensus estimate was for slower growth, but here we are. Manufacturing is in contraction and the economy continues to weaken. Given the plunge in new orders and backlog of orders, jobs and the overall economy will likely weaken as well. Expect that trend of 48 months of economic growth to break next month.


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