ISM: Just About Every Measure of Activity Slowing… Except Hiring

Source: Economics Group of Wells Fargo Bank, N.A. Summary Today’s May ISM shows the fastest rate hikes in a generation are slowing just about everything in the manufacturing sector except the pace of hiring. For the Fed, falling prices and slowing activity without denting the labor market could diminish some urgency on their part to tighten further. Clear Signs of Recession in Manufacturing Sector Some parts of the economy, such as consumer spending and the labor market, have appeared at times in this tightening cycle to be impervious to the effects of rate hikes from the Federal Reserve. The manufacturing sector has long demonstrated that it has no such Kevlar. May notches the seventh straight month of contraction for the bellwether ISM, a run that is rarely seen outside of recession (chart). That said, we know from conversations with manufacturing clients and from the industry sector-level data in the ISM that not all industries are in free fall. This may explain why the prices paid index, with its on-again, off-again readouts have been inconclusive about the direction of price pressures. Prices paid has literally been in contraction one month and expansion the next every month so far this year. Still, the dip in May takes it to a fresh 2023 low and also marks the biggest sequential decline since July 2022 (chart). This development may diminish some of the Fed’s urgency to deliver yet another rate hike at its upcoming meeting later this month. READ FULL ARTICLE >>