Tariff impact all over the ISM mfr'g index

The May ISM manufacturing index fell a touch to 48.5 from 48.7, 1 pt below expectations and at a 5 month low. New orders rose slightly by .4 pts but remained under 50 at 47.6. Backlogs were up too to 47.1 but off the depressed level of 43.7 and still less than 50. Inventories, after being above 50 in March and April, fell back under to 46.7.

With new orders, ISM said “new orders continue to slow, as which party will pay for potential tariff costs is still the prime topic of negotiations between buyers and sellers. A lack of new orders from overseas customers is also a key factor.”

On inventories, “This reading in contraction territory indicates that the pull forward of materials by companies to minimize the financial impacts of tariffs is largely completed.”

Export orders are at a depressed 40.1, lower by 3 pts m/o/m and imports plunged by 7.2 pts to 39.9, the lowest since May 2009. ISM said, “New export orders contracted sharply due to the combination of slow overseas growth, as well as the application of counter tariffs applied to a multitude of U.S.-manufactured products.” On imports, “Imports continue to contract as demand has reduced the need to maintain import levels from previous months, as well as due to the impact of tariff pricing.”

The reason why the April trade goods deficit shrunk so much is because imports collapsed.