The Institute for Supply Management (ISM) manufacturing purchasing managers index (PMI) came in at 52.7 in April, unchanged from March and marking the fastest expansion for the index since August 2022. The latest reading was lower than the 53.1 forecast and is the index's fourth straight month in expansion territory.
Here is an excerpt from the latest report:
Spence continues, “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 percent of the comments were positive and 69 percent negative, with a positive to negative sentiment ratio of 1 to 2.2. Among comments, the war was mentioned in 47 percent and tariffs in 18 percent. As was the case last month, some panelists referenced both topics within a single comment or in mixed sentiment.
“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 percent indicated that managing head counts remains the norm at their companies as opposed to hiring, and of those managing head counts, 34 percent are using layoffs and 43 percent using attrition or not backfilling positions.
“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 percent, from 78.3 percent in March, and the highest reading from April 2022, when it was also at 84.6 percent. The Imports Index lost 2.3 percentage points for a reading of 50.3 percent, compared to 52.6 percent in March.
“Looking at the manufacturing economy, 19 percent of the sector’s gross domestic product (GDP) contracted in April, compared to 16 percent in March, and the percentage of manufacturing GDP in strong contraction (defined as a composite PMI® of 45 percent or lower) decreased to 2 percent, compared to 4 percent in March. The share of sector GDP with a PMI® at or below 45 percent is a good metric to gauge overall manufacturing weakness. Of the six largest manufacturing industries, four (Transportation Equipment; Machinery; Computer & Electronic Products; and Chemical Products) expanded in April,” says Spence.
