May ISM manufacturing report: New orders, production, employment grow; employment index highest since April 1973

Economic activity in the manufacturing sector grew in May for the 12th consecutive month, while the overall economy grew for the 31st consecutive month, according to the latest Manufacturing Institute of Supply Management (ISM) Report on Business®.

Norbert J. Ore, C.P.M., ISM Manufacturing Business Survey Committee chair, and group director, strategic sourcing and procurement, Georgia-Pacific Corp., said, "The manufacturing sector grew at a faster rate in May, continuing its recent strong performance. The rate of growth in new orders and production slowed slightly, but was offset by a significant increase in employment. Employment (61.9 percent) has not registered this high since April 1973, when it registered 62.6 percent."

Among the 19 industries reporting overall growth are fabricated metals and primary metals, which also are among the 17 industries reporting employment growth.

Comments from respondents indicated demand is strong in most industries, but they also expressed concerns about rising materials prices and energy costs. A number of respondents mentioned adding permanent jobs, as well as adding temporary and seasonal workers. While allocation, extended lead times, and low inventories were mentioned as concerns, it appears that ISM members are able to work through those issues at this time.

"It appears that second-quarter growth will be very solid, and the momentum should carry over into the second half of the year. 2004 is shaping up as one of the better years for manufacturing. Many respondents indicated that order backlogs are growing for the first time in several years," said Ore.