 | The Manufacturing Sector Continues to Boom |
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Implications: The factory sector continues to boom and is leading the V-shaped recovery. Although the ISM index declined slightly in May, it is still at levels last seen in 2004 and, according to the Institute for Supply Management, May's index of 59.7 is consistent with real GDP growth of 6% annually, the same as we are forecasting for Q2. Future prospects for manufacturing look promising as well, with the new orders index at 65.7. Meanwhile, the employment index hit the highest level since 2004 and the second highest level since 1983. This suggests manufacturing payrolls probably grew for the fifth straight month in May (reported Friday). Unfortunately, the prices paid index continues to show inflation. Although the index fell to 77.5, it is still elevated to levels last seen in the summer of 2008, when oil prices spiked dramatically. In other news this morning, construction increased 2.7% in April, the fastest gain in a decade. The increase in construction was widespread, including home building, commercial construction, and government. The gain in residential construction was led by home improvements, while new single-family homes also increased. Commercial construction, which increased for the first time in more than a year, was led by electric power plants and manufacturing structures. Government construction was led by bridges, water supply, and parks/camps.
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