Two of the main manufacturing gauges for the US posted a further decline for the month of May. The IHS Markit index is now at 50.5, just barely above the 50 level for contraction.
Here’s what Chris Williamson, Chief Business Economist at IHS Market had to say about the May data in their June 3 press release:
“May saw US manufacturers endure the toughest month in nearly ten years, with the headline PMI down to its lowest since the height of the global financial crisis. New orders are falling at a rate not seen since 2009, causing increasing numbers of firms to cut production and employment. At current levels, the survey is consistent with the official measure of manufacturing output falling at an increased rate in the second quarter, meaning production is set to act as a further drag on GDP, with factory payroll numbers likewise in decline.”
“While tariffs were widely reported as having dampened demand and pushed costs higher, both producers and their suppliers often reported the need to hold selling prices lower amid lackluster demand. While this bodes well for inflation, profit margins are clearly being squeezed as a result.”
“With future optimism sliding sharply lower in May, risks to nearterm growth have shifted further to the downside. “While companies of all sizes are struggling, the biggest change since the strong growth seen late last year is a deteriorating performance among larger companies, where surging order book growth just a few months ago has now turned into contraction, the first such decline seen in the series’ ten-year history.”
The Institute for Supply Management (ISM) manufacturing index also posted a slower rate of growth for the month of May coming in at 52.1.
In their June 3 press release, businesses cited continued expansion at softer levels with concerns over the escalation in trade tensions between the US and China. Numerous firms said tariffs are increasing input costs and leading to significant changes on where goods are purchased.
The J.P. Morgan Global Manufacturing PMI posted its lowest reading since October 2012 coming in at 49.8 for the month of May, indicating that global manufacturing has now downshifted into contractionary territory.
Here’s what J.P. Morgan had to say in their June 3 press release:
“Global PMI surveys signaled that manufacturing downshifted into contraction during May. Business conditions deteriorated to the greatest extent in over six-and-a-half years, as production volumes stagnated and new orders declined at the fastest pace since October 2012. The trend in international trade continued to weigh on the sector, with new export business contracting for the ninth month running. Business optimism fell for the second month in a row and to its lowest level since future activity data were first collected in July 2012.”