ISM Manufacturing Index Moves Back into Contraction Territory in April

The Institute for Supply Management (ISM) manufacturing purchasing managers index (PMI) fell to 49.2 in April from 50.3 in March. The latest figures draws the index back into contraction territory after expanding for one month. The index has now contracted for 17 of the past 18 months. The April reading was below the forecast of 50.0.

Here is an excerpt from the latest report:

Fiore continues, “The U.S. manufacturing sector dropped back into contraction after growing in March, the first time since September 2022 that the sector reported expansion. Although demand improvement slowed, output remains positive and inputs stayed accommodative. Demand softening was reflected by the (1) New Orders Index dropping back into contraction, offset by fewer comments regarding ‘softening,’ (2) New Export Orders Index indicating contraction after two months of expansion, offset by panelists’ more optimistic comments, (3) Backlog of Orders Index remaining in moderate contraction territory, dropping back slightly compared to March, and (4) Customers’ Inventories Index at the ‘just right’ level, neutral for future production. Output (measured by the Production and Employment indexes) moderated compared to March, with a combined 2.1-percentage point downward impact on the Manufacturing PMI® calculation. Panelists’ companies slightly increased their production levels month over month, and head-count reductions continued (but showed signs of easing) in April. Inputs — defined as supplier deliveries, inventories, prices and imports — continued to accommodate future demand growth. The Supplier Deliveries Index dropped marginally, continuing in ‘faster’ territory, and the Inventories Index was flat (the same reading as in March) and in slight contraction territory. The Prices Index moved further upward into strong expansion (or ‘increasing’) territory, as commodity driven costs continue to climb. Imports continued to grow, at a slower rate in April.