Home / Business News / Manufacturing PMI Hits Lowest Since October 2016 as Trade Worries Bite

 

The US manufacturing purchasing managers’ index hit the lowest reading in two and a half years last month as supplier deliveries and inputs softened and trade tensions hit sentiment in the sector.

The manufacturing PMI came in at 52.1%, down from 52.8% reported in April and hitting the lowest level since October 2016 even as the measure still showed growth by staying above 50%, the Institute for Supply Management said on Monday. The consensus on Econoday was for a reading of 53%.

“Respondents expressed concern with the escalation in the US-China trade standoff, but overall sentiment remained predominantly positive,” said Timothy Fiore, chair of the ISM’s manufacturing business survey committee. “Softening this month was primarily due to inputs — supplier deliveries and inventories.”

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The new orders index rose one percentage point to 52.7% while production slowed by the same amount to 51.3% last month. Employment rose to 53.7% from 52.4% while supplier deliveries dropped 2.6 points to 52% and inventories was down two points to 50.9%. Prices rose 3.2 points to 53.2% while backlog of orders dropped to 47.2% from 53.9%.

Ian Shepherdson of Pantheon Macroeconomics said the new orders index growth means the details are “a bit better than the headline” because that measure can lead the other components. “The official manufacturing output data for May likely will be much better than the ISM headline suggests, because two unfavorable calendar effects from April will reverse, but the trend will remain soft, and likely will weaken further as the full hit from the latest tariffs work through.”

Export orders rose to 51% from 49.5%, but showed little momentum as purchasing managers cited tariffs and delayed supplies at the Mexican border, said Sal Guatieri, senior economist at BMO Capital Markets.

 
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