US manufacturing ISM dips unexpectedly in May
Factory sector activity in the States cooled a tad more than expected last month amid widespread concern over the impact of trade tariffs, falling order backlogs and output, the results of a widely-followed survey showed, although sentiment was still described as "predominantly positive".
The Institute for Supply Management's manufacturing sector Purchasing Managers' Index jumped slipped from a reading of 52.8 in April to 51.2 for May, coming in below the consensus forecast for a print of 53.0.
"Respondents expressed concern with the escalation in the U.S.-China trade standoff, but overall sentiment remained predominantly positive. The PMI continues to reflect slowing expansion," said Timothy Fiore, the chair of the ISM survey committee.
A gauge of new orders improved a little, rising from 51.7 to 52.7, as did a sub-index linked to hiring in the sector, which rose from 52.4 to 53.7, and another for new export orders increased from 49.5 to 51.0.
But a sub-index linked to order backlogs retreated from 53.9 to 47.2.
Prices paid by firms on the other hand increased, with the corresponding sub-index climbing from 50.0 to 53.2, but that for output levels dipped from 52.3 to 51.3.
Among the responses from survey participants, one from the Chemical Products space said that the threat of additional tariffs had forced his company to shift its supply chain from China to Mexico.
Another respondent, from the Petroleum and Coal Products sector, said the 15% increase in Section 301 tariffs, while threatened for many months, had not been expected.
"The sector can’t thrive when it’s being hit by new taxes at random every few weeks. Depending on just how far the administration goes with its Mexico tariffs, the ISM is likely to remain sluggish at best but in the worst case it could roll over by mid-summer," said Ian Shepherdson, at Pantheon Macroeconomics.
"This isn’t about macro, it’s about the whims of a president who understands very little about how the economy actually works."