Meet&CoTEMPE, Ariz. — According to the Institute for Supply Management’s (ISM) June Report On Business released Monday, U.S. manufacturing activity declined for the third straight month in May. The Manufacturing Purchasing Managers’ Index (PMI) registered 48.5%, indicating continued sector contraction.
Despite this broad slowdown, the furniture and related products industry was one of seven sectors reporting growth. Susan Spence, Chair of ISM’s Manufacturing Business Survey Committee, stated the data reflects persistent economic challenges, with production and employment indices remaining in contraction territory.
“U.S. manufacturing activity experienced further contraction following only marginal expansion in February,” Spence noted. “Demand and output indicators present a mixed picture, while inputs show signs of weakening.”
Key indicators demonstrated ongoing challenges:
- The New Orders Index, a critical demand gauge, contracted for the fourth consecutive month (47.6%), though slightly improved from April’s 47.2%.
- The Production Index remained in contraction, rising modestly to 45.4% from 44%.
- The Employment Index showed a slight increase to 46.8% but remained below the 50% growth threshold.
A notable development was the rise in the Supplier Deliveries Index to 56.1%, typically suggesting increased demand pressure causing delays. However, Spence attributed slower deliveries primarily to port congestion and tariff disruptions rather than heightened demand.
Inventories and trade data signaled caution:
- The Inventories Index fell sharply to 46.7% from 50.8%.
- Imports contracted significantly, dropping 7.2 percentage points to 39.9%.
- Export orders also declined markedly.
Sector performance was uneven. Alongside furniture, growth occurred in plastics and rubber products, petroleum and coal products, nonmetallic minerals, electrical equipment, fabricated metals, and machinery. Conversely, seven sectors contracted, including wood products, food and beverages, and transportation equipment.
Spence highlighted that 57% of manufacturing GDP contracted in May, up from 41% in April. However, the proportion of manufacturing GDP with a composite PMI at or below 45%—indicating stronger contraction—fell to 5% from 18%, potentially signaling the slowdown’s most acute phase has passed.
Uncertainty persists. “Companies continue to reduce production plans,” Spence stated. “Workforce reductions are ongoing, and input weakness—including inventory drawdowns and import contraction—points to sustained caution in coming months.”
The Customers’ Inventories Index fell to 44.5% in May, indicating levels consistently below what survey panelists consider optimal. Furniture was among ten industries reporting inventories as “too low,” suggesting potential replenishment demand could support its production despite the broader downturn.
The Prices Index remained elevated at 69.4%, signifying persistent cost pressures, though slightly moderated from April.
Based on a monthly survey of supply chain executives, the ISM PMI is a closely monitored leading indicator of U.S. manufacturing health. Readings above 50% denote expansion, while readings below 50% indicate contraction.
