US manufacturing sector expands faster in May amid continued supply constraints

Washington, June 2

The US manufacturing sector saw faster growth in May amid continued supply chain bottlenecks, the Institute for Supply Management (ISM) reported.

The Purchasing Managers' Index stood at 56.1 per cent, up 0.7 percentage points from the April reading. Any reading above 50 per cent indicates the manufacturing sector is generally expanding, according to the ISM report on Wednesday.

"The ISM manufacturing report for May offers a mixed read on the state of US industry," Tim Quinlan and Shannon Seery, economists at Wells Fargo Securities, wrote in an analysis.

"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," the two economists added.

The New Orders Index reading of 55.1 per cent is 1.6 percentage points higher than that recorded in April, according to the ISM report. The Backlog of Orders Index registered 58.7 per cent, 2.7 percentage points higher than the April reading, Xinhua news agency reported.

The Supplier Deliveries Index reading of 65.7 per cent is 1.5 percentage points lower than the April figure, indicating slightly faster deliveries and easing supply chain congestion.

The Prices Index registered 82.2 per cent, down 2.4 percentage points compared to the April figure, the ISM report showed.

"Price increases haven't let up. I thought 2022 was going to be better, but it hasn't been. Shortages (among other issues) are still disrupting the supply chain," said a business executive from the plastics and rubber products industry.

The Employment Index, meanwhile, went into contraction territory at 49.6 per cent, 1.3 percentage points lower than that recorded in April.

Quinlan and Seery said that despite a sub-50 print for the employment component, businesses are having less trouble finding help.

"Despite the Employment Index contracting in May, companies improved their progress on addressing moderate-term labor shortages at all tiers of the supply chain," said Timothy Fiore, Chair of the ISM's manufacturing business survey committee.

The US manufacturing sector, however, "remains in a demand-driven, supply chain-constrained environment," said Fiore.

A business executive in the computer and electronic products industry said suppliers are seeing "a light at the end of the tunnel" for restoration of semiconductor component supply, noting that second-quarter and third-quarter supply "appears to be loosening".