Contraction Continues Despite Fifth Consecutive Improvement in ISM Manufacturing

The Institute for Supply Management released its monthly guage of manufacturing today which came in at 42.8 in May compared to 40.1 in the previous month. Economists polled by Bloomberg had expected a rise to 42.3 while contraction (signalled by a reading below 50.0) continues for the 16th month. Prices paid also posted a considerable increase to 43.5 from 32, well above expectations for the indicator to move slightly higher to 35. Of the ten figures that make up the index, seven posted gains with new orders rising to 51.1. The three measures that fell were two types of inventories and employment which posted a small decline to 34.3 from 34.4 in the previous month.

Markets are reacting positively to the release and other data which included a rise in US personal income, UK house prices that stopped falling, and ongoing expansion in China’s PMI that has sent markets across the world racing higher. On the currency front, the euro continues to climb as it approaches a key fibonacci level while commodities rally as crude oil rises to the highest since early November.