April’s US ISM Manufacturing data offers a mixed image on the state of industry

Wednesday’s data has showed an unexpected acceleration in the US ISM Manufacturing PMI Index in May from 55.4 to 56.1. According to analysts at Wells Fargo, the report offers a mixed read on the state of the industry. “Orders and order backlogs are growing at a faster pace. Meanwhile, supplier deliveries are getting better but only incrementally, and inflation pressure is fading but not materially.”

Key Quotes:

“High demand and limited supply are keeping pressure on inflation. The prices paid component held above 80 for the third straight month. While that is blisteringly hot, the 82.2 reading in May is down a couple notches from 84.6 in April.”

“The May employment report is due out on Friday morning and our forecast is for nonfarm payrolls to increase by 325K jobs. Manufacturers have added jobs for 12-straight months, and we see no reason for any sustained disruption to that in a period when orders are still pouring in.”

“With inventories gradually being rebuilt there is some evidence that parts of the supply chain are functioning again.”

“Swooning financial markets and a Federal Reserve bent on raising rates did little to slow activity in the manufacturing sector in May. The ISM manufacturing index rose to 56.1 signaling an even faster pace of expansion than a month earlier. The challenges confronting U.S. industry have not changed: material and input components remain in short supply as do skilled workers.”