US manufacturing PMI 55.3 in May

S&P Global’s flash survey for May showed U.S. manufacturing gaining speed even as the broader private-sector picture stayed subdued. The manufacturing PMI rose to 55.3, up from 54.5 in April and the highest reading in 48 months. The composite output index, which combines manufacturing and services, held at 51.7. The services PMI eased to 50.9, down from 51.0 in April and below the 51.1 expected by economists. A PMI reading above 50 signals expansion, so the May data pointed to continued growth in both the factory sector and the overall private economy. But the split inside the report was clear: manufacturing strengthened while services lost momentum. Reuters reported economists had expected the manufacturing reading to ease to 53.8, not rise. (pmi.spglobal.com) ### What does a 55.3 manufacturing PMI actually tell you? The 55.3 reading means a larger share of purchasing managers reported improving conditions than worsening ones in May. S&P Global’s PMI is a diffusion index built from monthly survey responses on output, new orders, employment, supplier delivery times and inventories. A higher number does not measure the size of output directly, but it does indicate the breadth of expansion across firms. (money.usnews.com) Reuters said the May reading was the highest since May 2022. FXStreet separately reported that manufacturing output improved to 55.3 from 54.5, confirming that factory activity accelerated rather than merely stabilizing. (pmi.spglobal.com) ### Why did factories improve while services softened? Reuters reported that manufacturers built inventories to protect against shortages and higher costs tied to the war with Iran. S&P Global said input inventories rose to an 11-month high because companies were building “safety stocks” amid price and supply worries, while supplier delivery times lengthened to levels last seen in August 2022. (money.usnews.com) Services moved the other way. The flash services PMI slipped to 50.9, a modest expansion reading but weaker than expected. S&P Global said new business intakes fell for the first time in two years, and Chris Williamson, chief business economist at S&P Global Market Intelligence, said the war in the Middle East and rising prices were hitting demand. (money.usnews.com) ### Was this a demand boom or a stockpiling story? S&P Global’s own commentary pointed more to precautionary buying than to a broad-based demand surge. Reuters said new order growth at factories slowed even as inventories rose. Williamson said the economy would “struggle to manage annualized GDP growth of much more than 1% in the second quarter,” and added that a boost from precautionary stock building “will not last forever.” (investinglive.com) That distinction matters because a higher PMI can reflect firms rushing to secure materials before costs rise further. Bloomberg reported that customers were trying to get ahead of mounting price pressures, while Reuters tied the stockpiling to fears of shortages and higher prices. (money.usnews.com) ### What did the report say about inflation pressure? Reuters said factory input prices jumped sharply in May. The survey’s measure of prices paid by manufacturers for inputs rose to 79.5 from 68.4, the highest since June 2022, while the gauge of factory output prices rose to 63.3 from 61.7, the highest since September 2022. The overall business input-price measure increased to 64.0 from 61.3, the highest since November 2022. (bloomberg.com) Williamson said firms’ costs had risen at a pace not seen since the 2022 energy shock and that those costs were being passed on through higher selling prices. His conclusion was direct: “The survey price gauges therefore indicate that inflation looks set to rise further just as the economy cools.” (money.usnews.com) ### What comes next in this data cycle? The May figures were flash readings, meaning they are preliminary estimates based on incomplete monthly responses. S&P Global will publish final May PMI data in June on its PMI releases page, where it also posts updated commentary for U.S. manufacturing, services and composite activity. (pmi.spglobal.com) (investinglive.com)