Economy

PMI Manufacturing Flash Reading Slows to a Crawl

Jon C. Ogg

Published: May 23, 2016 11:10 am

Last Updated: January 13, 2020 7:42 am

Monday’s only major U.S. economic report was the PMI Manufacturing Index Flash for May. This is considered a real-time report by traders, and that is a concern when you see that May’s reading dropped to 50.5. April’s reading was 50.8, and Bloomberg was calling for a reading of 51.0 (with an Econoday range of 50.5 to 51.5) for May.

Markit signaled that U.S. manufacturing has been trending downward to a crawl, and the 50.5 reading is barely above the 50.0 breakeven line. Any reading under 50 represents contraction, and above 50 represents growth.

What stands out here is that the May reading was the lowest number of the recovery and production declined for the first time since September of 2009. Another concern is that the growth in new orders is slowing at the same time that inventory inputs are in decline.

Markit’s report said:

U.S. manufacturers signalled the first reduction in output since September 2009 in May, although the rate of decline was only marginal. A number of monitored firms mentioned that uncertainty around the general economic outlook had caused clients to delay spending decisions, which in turn prompted firms to trim their production schedules.

Softer client demand was highlighted by a further slowdown in new business growth in May. Furthermore, the latest expansion in new order books was the weakest seen in 2016 so far. Data indicated that reduced foreign client demand had underpinned slower growth in overall new orders.

New export sales fell for the second month in a row, though the rate of reduction softened since April.

Another concern is on the inflation front, although perhaps the deflationary pressures are abating. The Markit report said that average selling prices in May set by U.S. manufacturers were broadly unchanged, ending a three-month sequence of price discounting.