Industrial economy improves, but manufacturer/distributor concerns linger

Positive economic reports from distributors, manufacturers and purchasing execs in May is tempered by ongoing uncertainty over U.S. and global economy

Industrial distributors and manufacturers reported an uptick in business during May following two months of slower growth, according to the monthly Economic Indicators Report from the Industrial Supply Association, which represents distributors, manufacturers and independent sales representatives of industrial supplies and equipment.

ISA’s report showed manufacturer activity in May at 63% compared to 59% the previous month, with the distributor index at 62% compared to 58% in April. A reading above 50% indicates expansion in the sector, and a reading below 50% indicates contraction.

Both numbers bode well for the industrial supplies sector, and follow on the heels of continued growth in other key economic indicators. Earlier in May, the Institute for Supply Management’s PMI registered 54%, a slight drop compared to 55% the previous month, but still above the 50-point threshold indicating expansion in U.S. manufacturing.

“While the expansion continues for the industry, there is a growing sense of uncertainty for the economy at large,” said John Buckley, ISA executive vice president. “Yet while the darkening clouds of the world economy and the continued sluggishness of the overall U.S. economy are legitimate reasons for concern, the industrial supply industry continues to find ways to expand.”

In other economic news, U.S. industrial production edged down 0.1% in May after having gained 1% in April, according to figures from the Federal Reserve.

Manufacturing output decreased 0.4% during the month after having advanced 0.7% in April. The index for manufacturing in May was 5% above its year-earlier level. The factory operating rate moved down 0.4% to 77.6%, a level 1.2 percentage points below its long-run average.

The production index for durable goods dropped 0.5 percent in May after a 1.4% gain in April. Durable goods industries down more than 1 percent in May included nonmetallic mineral products, primary metals, motor vehicles and parts, and furniture and related products. The largest increase among major durable goods industries was for wood products, which moved up 1%; smaller gains were recorded by fabricated metals; electrical equipment, appliances, and components; and miscellaneous manufacturing. Capacity utilization for durable goods manufacturing was 78%--5 percentage points above its year-earlier level and 0.9% above its long-run average.

The production of nondurables decreased 0.2 percent in May, its third consecutive month without a gain.

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