US manufacturing activity held steady overall in May, but included a sharp decline in production and prices, offset by a gain in new orders, the Institute for Supply Management said Thursday.
Many of the comments from businesses surveyed for the report note the increasing difficulty in finding qualified employees amid the continued growth in the industry, and also mentioned concerns over Trump administration trade policy.
The ISM purchasing managers index rose a tenth to 54.9 percent in May, a modest gain after two months of declines in the index, but the ninth consecutive month showing growth in the industry.
The key new orders index jumped two points compared to April, to 59.5 percent, and employment increased 1.5 to 53.5 percent.
But production fell 1.5 to 53.5 percent, while imports and new export orders each fell two points.
Prices plunged eight points, even while 15 of the 18 industries surveyed reported paying higher prices for raw materials, the report showed.
“There appears to be some relaxation on price side. That’s a pretty significant swing,” said Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee.
But it was the comments on the difficulty finding workers, especially for factories, that Fiore said was the most significant element of the report, and may be holding back production.
“We’ve had some fairly strong months of positive employment activity in our report,” he told reporters in a conference call. “Finding qualified people on the turn of a dime is not easy …(and) is probably impacting the production number.”
However, he said the fact 11 of 18 industries reported positive employment growth is a good sign, and will not impact output for more than a couple of months.
Nor is he very concerned about wage pressures.
“Yes, there may be pressure on wages at some point downstream, but just seeing the comments that they’re having trouble finding them (workers) indicates to me we have some positive employment activity going on over the next three to four months,” Fiore said.
Also notable in the report were the many comments on the political uncertainty and the potential impact on business.
“Economy is still strong, but [the] political climate can change things very quickly,” one company in transportation equipment said.
And the trade dispute with Canada over softwood lumber imports also was a concern.
“Our business is definitely paying attention to developments with the Canadian lumber tariff announcement. The final outcome could change our fiber pricing,” a paper products company said.
President Donald Trump has picked fights with Canada over dairy and softwood lumber, and imposed tariffs of 24 percent on the imports of lumber used heavily in housing construction.
“That’s concerning, obviously, that a governmental action that could be done … without a lot of discussion could impact either availability of product or the cost of that product,” Fiore said.
“We’ll see where it goes.”
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