Tuesday, May 26, 2015

Regional Fed Manufacturing Surveys for May and the ISM Index

by Bill McBride on 5/26/2015 04:32:00 PM

Earlier today the last two regional Fed surveys for May were released. As expected, the Dallas Fed was especially weak due primarily to weakness in the oil sector.

From the Dallas Fed: Texas Manufacturing Activity Contracts Further

Texas factory activity declined again in May, according to business executives responding to the Texas Manufacturing Outlook Survey. ... The general business activity index fell to -20.8 in May, its lowest reading since June 2009.

Labor market indicators reflected employment declines and shorter workweeks. The May employment index declined 10 points to -8.2, after rebounding slightly above zero last month. Twelve percent of firms reported net hiring, compared with 21 percent reporting net layoffs. The hours worked index fell from -5 to -11.6.
emphasis added
And from the Richmond Fed: Manufacturing Sector Activity Remained Tepid; Employment Edged Up, Wage Growth Accelerated
Manufacturing activity remained soft this month, with several components flattening. The composite index for manufacturing moved to 1 following April's reading of −3, while the shipments index leveled off to −1 from −6. In addition, the index for new orders gained eight points, reaching a nearly flat reading of 2. ...

Manufacturing employment continued to grow at a modest pace in May. The index ended the survey period at 3 compared to last month's reading of 7. The average workweek increased; the index moved up two points to end at 6. Additionally, the index for average wages advanced 11 points to finish at a reading of 20.
Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Fed Manufacturing Surveys and ISM PMI Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through May), and five Fed surveys are averaged (blue, through May) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through April (right axis).

It seems likely the ISM index will be weak again in May, and will probably be around the same level as in April.