Growth in southeastern Wisconsin’s manufacturing sector rebounded in May after slowing the previous two months, but survey respondents expressed concern about rising prices and increasing lead times.
The Milwaukee-area PMI increased to 67.9 in May, up from 58.26 in April, according to the latest Marquette-ISM Report on Manufacturing. Any reading above 50 indicates growth in the sector. The report has been in positive territory since November 2016 and has averaged 66.36 over the last six months.
May’s report showed improved growth in new orders, production, order backlog and exports, along with declining customer inventories.
Despite the good news, respondents expressed concern as prices continued to increase and supplier deliveries slowed.
“Sales are strong,” one respondent said. “However, prices are soaring, lead times are skyrocketing and quality is declining.”
“This period of rapid growth and higher prices cannot continue,” another said.
Others said demand had begun to stabilize and suppliers seemed to be catching up, but the forecast beyond 90 days was described as “suspect.” Business is better than last year, but respondents expressed concern about commodity prices, tariffs, and exchange rates.
One particular area of concern was in the available supply of electronic components, with one saying the lack of availability was “the worse that I have seen in my 25 years in the electronics manufacturing industry.”
The blue and white collar employment measures in the report both dipped slightly, but remained well into positive territory at 61.3. Respondents said the labor market is very tight and they’ve seen challenges with trucking and deliveries.
The six-month business outlook improved from April as the report’s diffusion index – which seeks to eliminate positive and negative bias – increasing from 50 percent to 75 percent. The shift was driven by a decrease in the number of people expecting worse conditions and an increase in those with a positive outlook.
