U.S. manufacturing hit a nearly four-year high in April, as the S&P Global PMI climbed 2.2 points to 54.5. This expansion was largely driven by defensive stockpiling as companies braced for supply disruptions and price hikes linked to conflict in the Middle East. The latest reading was above the forecast of 54.0 and marked the ninth straight month in expansion territory.
Here is an excerpt from Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, in the latest press release:
“The surge in manufacturing activity in April is not the cause for cheer that at first glance it suggests. A key driving force behind the upturn is the need for companies to get ahead of further feared price rises and supply shortages, providing a short-term boost that could fade in the coming months as headwinds to the economy continue to build.
“Growth of purchasing activity hit a rate not seen for four years, since the pandemic, amid increasingly widespread supply delays and price rises commonly linked to the war in the Middle East, which has exacerbated existing pressure on supply and inflation from tariffs.
“Shipments, orders and production have all been boosted by the stock building, notably among larger companies with the deepest pockets.
“However, employment has fallen as firms grow increasingly worried over the need to reduce cost overheads amid an environment of rising raw material prices, while selling prices have jumped higher as producers seek to protect their margins.
“More encouragingly, business expectations for output in the year ahead have improved, partly reflecting hopes that the US will be less affected by the war than previously feared, and less than other economies, as well as reduced concerns over the impact of tariffs given the recent Supreme Court ruling. However, some of these improved expectations of future production gains reflected a reaction to better than anticipated order book inflows in April, which may prove to be a chimera as the stock building boost fades.”
Background on the S&P Global US Manufacturing PMI
The S&P Global US Manufacturing PMI™ measures the activity level of purchasing mangers in the manufacturing sector through a questionnaire of ~600 manufacturers. The reported headline number is a weighted average of New Orders (30%), Output (25%), Employment (20%), Suppliers' Delivery Time (15%), and Stocks of Purchases (10%). The S&P Manufacturing PMI is a diffusion index, meaning that a reading above 50 indicates expansion in the sector compared to the previous month and a reading below 50 indicates contraction.
