ISM Manufacturing Index
ISM Manufacturing Index: The Institute of Supply Management’s Index moved up 1.6 points on the month, (m/m) to 43.1 for May 2020, this value is a little weaker than the forecast of 50. The index has been lower than 50, (>50 = expansion) for three consecutive months. The new orders sub-index scored a 33.2. Overall, the ISM manufacturing index is weak, and fundamentals remain unfavorable as the global economy weakens.
The ISM manufacturing index is based on surveys of 300 purchasing managers in 20 industries. The survey is a diffusion index calculated as a percent of responses. A value of 50 is neutral, while less than 50 is contracting and greater than 50 is expansionary.
Figure 1 breaks down the detail of the composite index and sub-indexes. The composite index score for May was 43.1. One year ago, the composite index was a strong at 52.1. On a 3-month moving average, (3MMA) basis, the index posted a value 44.57, down 16.5% 3-months year on year (y/y). When examined on a 12MMA y/y comparison, the index decreased by 15.2% y/y.
Of the 18 manufacturing industries, the six that reported growth in May — in the following order — are: Nonmetallic Mineral Products; Furniture & Related Products; Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Paper Products; and Wood Products. The 11 industries reporting contraction in May, in order, are: Printing & Related Support Activities; Primary Metals; Transportation Equipment; Petroleum & Coal Products; Fabricated Metal Products; Machinery; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Chemical Products; Computer & Electronic Products; and Plastics & Rubber Products.
An Institute for Supply Management respondent stated, “Returning to full production for automotive, ramp-up will still depend on speed of automotive start-ups. We have built up inventory to stock. Ready to ship.” (Fabricated Metal Products)
At Gerdau we closely monitor the ISM manufacturing index since it is an excellent barometer of the present strength as well as a window on the likely short-run future of US manufacturing.