May 2020 Manufacturing ISM® Report On Business® Takes a Bounce

COVID-19 caused mass disruption in a short amount of time, and the effects of the pandemic will linger far into the future. The April 2020 Manufacturing ISM® Report on Business® dropped the manufacturing economy to a point not seen since the Great Recession, sparking questions of when and how the recovery would begin. Now, just one month later, the May 2020 Manufacturing ISM® Report on Business® shows we might already be on our way.

Though registering a PMI of only 43.1, the May report is up from April’s low of 41.5. Could this be an early sign of recovery? It remains to be seen what the uptick signifies, but manufacturers are optimistic about what it might indicate headed into the back half of 2020.

A bounce by the numbers

May 2020 numbers are less erratic than last months’ and even those headed into 2020, giving industry professionals reason to trust in a prospective recovery. The beacons of this report are even more reason to get excited: new orders, production, and employment all rose to buoy the report. New orders rose 4.7 basis points, production rose 5.7, and employment kicked up 4.6 points. Exports also were a source of optimism, rising 4.2 points against lower import numbers, which lost 1.4 points.

Supplier deliveries saw a major 8.0 drop in May, but are still firmly in expansion territory. Inventories also reversed course, trending back into expansion territory after contracting in April.

Reason for optimism

Despite a roughly 2.0 uptick in the report, there are plenty of reasons to be excited — in particular, proactive planning by industry professionals mitigated the impact of COVID-19. Evasive maneuvers and agile supply chain decisions kept many manufacturers open and producing. But there’s more to look forward to, according to industry executives.

“Fuel sales demand are beginning to rebound in May as stay-at-home orders are lifted across the country.” (Petroleum & Coal Products)

“Despite the COVID-19 issues, we are seeing an increase of quoting activity. This has not turned into orders yet, but it is a positive sign.” (Computer & Electronic Products)

“We see a lot of positive signs, despite what’s going on. People seem to continue to be building and looking to projects for fall of 2020 and beyond. There is good optimism out there.” (Nonmetallic Mineral Products)

Timothy Fiore, chairman of the ISM Business Survey Committee, has called May a ‘transitionary month,’ and expects continued strength headed into June. This likely stems from the drop in supplier deliveries reported in May, signaling that the bottlenecks for fulfillment have finally lifted.

Man looking at candlestick stock charts dual monitors

Phase two of a multi-part economic crisis?

Wall street and financial analysts don’t necessarily share the same optimism of a rebounding manufacturing economy. Despite rising for the first time in four months, some economists have cautioned looking at the positive PMI too closely. The claim is that we’ve simply entered phase two of a multi-part economic crisis.

Economies are reopening and people are going back to work — but economists warn this is a false sense of stability. Why? Because purchasing power may not return to the public for many months. As people pay off debts accrued during COVID-19 and struggle to regain footing, purchasing will take a hit and with it, the PMI. Sprinkle in civil unrest, tension with China, and an election season that promises radical turbulence, and manufacturing may need to put off its recovery until 2021.

It won’t be long until we find out if this is true or if May’s gains are the start of something great.

Manufacturing may be in a position to rebound into June — or, we could see a plateau that extends into the latter half of the year. Whatever the case, it’s important for manufacturers to act with purpose during these uncertain times. If you’re behind on repairs or maintenance, you can always count on the professionals at Global Electronic Services. Contact us for all your industrial electronic, servo motor, AC and DC motor, hydraulic, and pneumatic needs — and don’t forget to like and follow us on Facebook!
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