Manufacturing sector continues to contract

A key measure of Milwaukee-area manufacturing activity once again indicated contraction in May. The seasonally adjusted Purchasing Managers Index was below 50 for now the second month in a row, according to the Marquette-ISM Report on Manufacturing.

The PMI was at 47.70 in May, down from 48.08 in April. Any number more than 50 indicates growth, while less than 50 signals contraction. This places the index at or above 50 for 17 of the past 21 months.

In the May survey, respondents said:

  • There have not been that many major issues at this time.
  • New construction has been improving.
  • New business is being conducted with WEMP.

Employment, supplier deliveries, customers’ inventories and imports grew in May, while new orders, production, inventories, prices, backlog of orders and exports declined.

Regarding these indices, respondents said:

  • Packaging is experiencing long lead times because of changes in the GHS compliant label requirements (GHS: Globally Harmonized System of Classification). The old warning labels have to be redone to comply with the new standards, and new bags need to be ordered sooner as a result. Due to this change, lead times are out an additional six to eight weeks. Expectations are that this should resolve itself by the third quarter but since the requirements take effect on June 1, companies are taking short-term measures to cope with the changes.
  • Distribution (resellers) is not keeping an adequate amount of stock.
  • The West Coast congestion has been clearing, however, the effects of the West Coast strikes are still lingering.

Seasonally adjusted blue collar employment declined from 52.6 in April to 47.8 in May, while seasonally adjusted white collar employment grew from 44.6 in April to 52.2 in May.

In the six-month outlook on business conditions, respondents indicated an upward shift in positive expectations compared with April. Approximately 54.5 percent of respondents expect positive conditions over the next six months, 36.4 percent expect conditions to remain the same and 9.1 percent of respondents expect conditions to worsen within the next six months.

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