Manufacturing activity unexpectedly grew at a slightly faster pace in May as the PMI edged up to 55.2 from 54.9 in April. The movements in the sub-indices were mostly small, but most indices moved in the “right” direction.

The sub-index for production bounced back by 2 index points to 53.5, after last month’s decline by almost 5 index points. Total order intake continues to indicate growth, but at a much slower pace than in the last two years. Export orders crawled back slightly above 50 and indicates unchanged growth, reflecting normalizing global demand. Production plans bounced back.

Delivery times and input prices continued to ease in May, albeit remaining at historically very high levels. Hence, delivery times are still increasing but at a slower pace. Freight prices have come down 25% from the peak, which could be interpreted as a sign of easing demand rather than resolved supply chain issues (see chart below).

The employment index bounced back after declining by 10 index points in the last two months and remains at high levels, thus indicating further near term strength on the red-hot Swedish labour market.

All in all, today’s report indicates that the manufacturing industry fared remarkably well in May, in line with other indicators. Manufacturing confidence is high and we are seeing more signs that supply issues are easing somewhat. However, companies are still struggling with high prices and an supply chains. The manufacturing industry is showing resilience in the near term but we still expect activity to slow down in the second half of this year as global demand eases.

The survey was conducted between 11 and 29 May.