According to the Institute of Supply Management (ISM), the U.S. grew for the 48th consecutive month while still declining 1.7 percent from the previous month. This is also the first time of manufacturing contraction since November 2012.
The New Orders Index declined 3.5 percent to 48.8 percent with the Production Index following, declining 4.9 percent to 48.6 percent. The Employment Index was little changed, down a tenth of a percent when compared to April’s reading. Raw material prices declined, as well.
Comments from different manufacturing sectors indicated that the economy is still flat from reasons due to restricted government spending and weakness in the Chinese economy. Those sectors that do see some growth say it is lukewarm at best.
The dollar index declines .38 percent on the poorer than expected ISM numbers while crude rallies strong, up 1.44 percent as of 10:15 EST.
ISM Chair Bradley J. Holcomb notes, “the past relationship between the PMI(TM) and the overall economy indicates that the average PMI(TM) for January through May (51.7 percent) corresponds to a 3 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI(TM) for May (49 percent) is annualized, it corresponds to a 2.1 percent increase in real GDP annually.”
However, it will be prudent to watch the trend throughout the year to see if the relative cumulative optimism continues through the summer months.