ISM Manufacturing Index

U.S. manufacturing activity continued to expand strongly in May as demand remained strong, but supply-chain bottlenecks and labor shortages weighed on manufacturers and constrained growth in factory output.

The ISM Manufacturing Report on Business PMI was 61.2 in May, up from 60.7 in April, data from a survey compiled by the Institute for Supply Management showed Tuesday. The reading beat expectations from economists polled by The Wall Street Journal, who forecast the index to come in at 60.5.

May's data suggests that factory activity across the U.S. expanded broadly and strongly, with all five subindexes that form the headline index in growth territory. A PMI reading above 50 indicates that the manufacturing economy is generally expanding, while below 50 indicates that it is generally declining. The ISM indicator shows that activity has been in expansion territory since June 2020.

The expansion in the manufacturing sector is broad-based across industry groups and it has further to run in light of tight inventories, but the sector is crippled by a variety of constraints on supply which prevents meeting strong demand, economists say.

The manufacturing PMI data also signaled that the U.S. overall economic activity is growing, as a reading above 42.8 over a period of time generally indicates an expansion of the economy. The PMI has been over this threshold since May 2020.

Source: Morningstar