Economic activity in the manufacturing sector expanded in April for the fourth consecutive month, according to the latest ISM Manufacturing PMI report. The report was issued by Susan Spence, MBA, chair of the Institute for Supply Management (ISM) manufacturing business survey committee.
“The Manufacturing PMI registered 52.7% in April, the same reading as March. The overall economy continued in expansion for the 18th month in a row. (A Manufacturing PMI above 47.5%, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index expanded for the fourth straight month after four straight readings in contraction, registering 54.1%, up 0.6 percentage point compared to March’s figure of 53.5%. The April reading of the Production Index (53.4%) is 1.7 percentage points lower than March’s reading of 55.1%. The Prices Index remained in expansion (or ‘increasing’ territory), registering 84.6%, a 6.3-percentage point jump from March’s reading of 78.3%. In the last three months, the Prices Index has increased 25.6 percentage points to reach its highest level since April 2022 (84.6%). The Backlog of Orders Index registered 51.4%, down 3 percentage points compared to the 54.4% recorded in March. The Employment Index registered 46.4%, down 2.3 percentage points from March’s figure of 48.7%,” Spence said.
“The Supplier Deliveries Index indicated slowing performance for the fifth month in a row after one month in ‘faster’ territory. The reading of 60.6% is up 1.7 percentage points from the 58.9% recorded in March; the index has risen in each of the last five months, meaning delivery times are increasingly slowing. (Supplier Deliveries is the only ISM PMI Reports index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Inventories Index registered 49%, up 1.9 percentage points compared to March’s reading of 47.1%. The Customers’ Inventories Index reading of 39.1% is a 1-percentage point decrease compared to March,” Spence said. “The New Export Orders Index reading of 47.9% is 2 percentage points lower than the reading of 49.9% registered in March, making it the second month in a row in contraction territory. The Imports Index registered 50.3%, 2.3 percentage points lower than March’s reading of 52.6%.”
Spence continued, “In April, U.S. manufacturing activity remained in expansion territory, growing at the same pace as the month before. Of the five subindexes that make up the PMI, the New Orders and Supplier Deliveries indexes indicated faster growth compared to the previous month, the Production Index grew at a slower rate, and the Employment and Inventories indexes remained in contraction. In this second month of the Iran War (at the time of data collection), 31% of the comments were positive and 69% negative, with a positive to negative sentiment ratio of 1 to 2.2. Among comments, the war was mentioned in 47% and tariffs in 18%. As was the case last month, some panelists referenced both topics within a single comment or in mixed sentiment.”
Spence added, “Two of four demand indicators (the New Orders and Backlog of Orders indexes) remain in expansion, although the Backlog of Orders Index dropped 3 percentage points compared to March. The New Export Orders Index remained in contraction with a 2-percentage point decrease, and the Customers’ Inventories Index remains in ‘too low’ territory, contracting at a slightly faster rate. A ‘too low’ status for the Customers’ Inventories Index is usually considered positive for future production. Regarding output, the Production Index is in expansion for the sixth month in a row (although it lost ground compared to March), and the Employment Index decreased by 2.3 percentage points and remains in contraction. Among panelists, 60% indicated that managing head counts remains the norm at their companies as opposed to hiring, and of those managing head counts, 34% are using layoffs and 43% using attrition or not backfilling positions.”
Spence concluded, “Finally, inputs (defined as supplier deliveries, inventories, prices, and imports) had another month of mixed results. The Supplier Deliveries Index indicated increasingly slowing deliveries, the Inventories Index contracted at a slower rate, and the Prices Index vaulted again — up another 6.3 percentage points to 84.6%, from 78.3% in March, and the highest reading from April 2022, when it was also at 84.6%. The Imports Index lost 2.3 percentage points for a reading of 50.3%, compared to 52.6% in March. Looking at the manufacturing economy, 19% of the sector’s gross domestic product (GDP) contracted in April, compared to 16% in March, and the percentage of manufacturing GDP in strong contraction (defined as a composite PMI of 45% or lower) decreased to 2%, compared to 4% in March. The share of sector GDP with a PMI at or below 45% is a good metric to gauge overall manufacturing weakness. Of the six largest manufacturing industries, four (Transportation Equipment; Machinery; Computer and Electronic Products; and Chemical Products) expanded in April.”
The 13 manufacturing industries reporting growth in April — listed in order — are: textile mills; nonmetallic mineral products; primary metals; plastics and rubber products; miscellaneous manufacturing; transportation equipment; machinery; electrical equipment, appliances and components; paper products; fabricated metal products; computer and electronic products; chemical products; and furniture and related products.
The three industries reporting contraction in April are: wood products; petroleum and coal products; and food, beverage and tobacco products.
