US ISM: Production, new orders and employment remain in growth mode - Wells Fargo

The ISM manufacturing index for May came in at 54.9. According to analysts from Wells Fargo, expansion remains the signal as production, new orders and employment remain in growth mode.; they warn that rising input costs will pressure profits.

Key Quotes: 

“Consistent with several regional purchasing managers (Chicago, Philadelphia) indices released over the past few weeks, growth in the manufacturing sector continues to improve. The May ISM came in at 54.9 (top graph). When we examine the graph, we witness how much intracycle volatility is characteristic of manufacturing sentiment, so ups and downs are endemic to this survey. We estimate industrial production up 2.0-2.5 percent in the second half of 2017.”

“The production index came in at 57.1 and is now slightly above its twelve-month average. Moreover, the pipeline for activity remains positive as new orders were up at 59.5.”

“Export orders came in at 57.5, with 11 industries reporting growth including textiles, wood and paper. While not seasonally adjusted, the index indicates continued gains in exports.”

“The employment index came in at 53.5 with 11 industries reporting job gains to include furniture, electrical equipment and appliances. Manufacturing hiring remains on the upswing, with the employment index up near the highs since mid-2011. The index indicates another solid gain is in store for manufacturing payrolls in May.”

“Price pressures continue to mount in the manufacturing sector. Prices paid, bottom graph, came in at 60.5 in May with 15 of the 18 sectors reporting higher prices paid. Among those paying higher prices include electrical equipment, appliances, apparel and furniture.”