U.S. ISM manufacturing index recovers in May, rises to 58.7

The U.S. ISM manufacturing index recovered in the month of May after falling for two straight months through April. The index rose to 58.7, surpassing Barclay’s expectations of 57.5. Improvement was widespread across major categories. The index on production rose to 61.5, while the new orders index rose by 2.5 points. The latter was mainly driven by expectations of solid domestic demand, while the new export orders index dropped lower.

Given the uncertainty stoked by ongoing anti-trade rhetoric, it is likely that businesses have pared down expectations of external demand driving production. The employment index rebounded to 56.3, which is in line with the May payroll data that showed a healthy rise in manufacturing sector employment.

Meanwhile, the index on prices paid remained largely stable from April and remains elevated compared with levels seen at the end of last year. The backlog of orders deteriorated in the midst of slower supplier deliveries. The press release pins this on lead-time extensions, steel and aluminium disruptions, supplier labor issues, and transportation difficulties.

“That said, the survey finds firms broadly optimistic about demand and production, adding to evidence of strong sentiment in the manufacturing sector”, stated Barclays.

At 18:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -59.2247. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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