ISM data suggests "green shoots" that were only tentative in April have become apparent in May

The Institute for Supply Management (ISM) manufacturing index rose by 1.3 points to 52.8 in May ahead of market expectations for a 52.0 print. Details of the report were encouraging with eight out of ten indexes sub-components gaining on the month. 

TD Economics says - "This is an encouraging report, suggesting that the "green shoots" that were only tentative in April have become apparent in May."

Indeed, after six consecutive monthly declines, the slowdown in U.S. manufacturing activity has finally reversed course. While the index remains 2.8 points below its year-ago level, gains in new orders and backlog orders give hope that the improvement will be sustained in the coming months.

While certain temporary factors, such as shipping disruptions at West Coast ports, are dissipating, others are proving to be more persistent. The rapid appreciation of the U.S. dollar has certainly not been a walk in the park for manufacturers. The dollar remains below its peak level in March, but re-started its ascent in May, and has the potential to rise further as the year progresses. This will continue to weigh on foreign demand and corporate profits from overseas sales, adds TD Economics