"By Justin Lahart
The message from the Purchasing Managers’ Index, according to Institute for Supply Management chair Norbert Orr: With inventories much lower, and orders on the rise, manufacturers are on the brink of recovery.
The Purchasing Managers’ Index rose to 42.8 in May, up from April’s 40.1, putting below the 50 that the ISM says represents an expanding manufacturing economy. But for a second month, more purchasing managers said that their customers’ inventories were too high than said they were too low. And for the first time since November 2007, the purchasing managers said that there was an increase in new orders.
“I believe we’re in the recovery stage right now,” said Mr. Orr. “we’ve seen a dramatic improvement in new orders that comes as a result of the major inventory correction.”
The next challenge, he says, will be whether manufacturers can grow fast enough, once recovery sets in, to add job to their payrolls. Here, Mr. Orr isn’t optimistic, particularly with the construction sector still in a funk and with the auto makers deeply distressed. “I expect that we we’ll continue to see declines in [manufacturing] employment but not at as fast a rate.”