The Institute for Supply Management (ISM) manufacturing purchasing managers index (PMI) came in at 48.7 in April, indicating contraction in U.S. manufacturing for a second straight month. The latest reading was above the forecast of 48.0.
Here is an excerpt from the latest report:
Fiore continues, “In April, U.S. manufacturing activity slipped marginally further into contraction after expanding only marginally in February. Demand and output weakened while input strengthened further, conditions that are not considered positive for economic growth. Indications that demand weakened include the (1) New Orders Index continuing in contraction territory, (2) New Export Orders Index dropping sharply further into contraction, (3) Backlog of Orders Index contracting at a faster rate and (4) Customers’ Inventories Index remaining in ‘too low’ territory. Output (measured by the Production and Employment indexes) also weakened. Factory output (production) contracted further in April, indicating that panelists’ companies are continuing to revise production plans downward in the face of economic headwinds. The Employment Index ticked up but remained in contraction, as panelists’ companies continued to release workers. Companies generally opted for layoffs because they are quicker to implement than attrition. Inputs are defined as supplier deliveries, inventories, prices and imports. Except for Imports, the other indexes indicated expansion. Inventory growth is not a positive sign when demand is moving in the opposite direction; the recent expansion is considered a temporary move to avoid tariffs, and levels will decline when such trade issues are resolved. Supplier delivery performance reflects this pull-forward activity and delays in clearing goods through ports of entry.
“Demand and production retreated and destaffing continued, as panelists’ companies responded to an unknown economic environment. Prices growth accelerated slightly due to tariffs, causing new order placement backlogs, supplier delivery slowdowns and manufacturing inventory growth. Forty-one percent of manufacturing gross domestic product (GDP) contracted in April, down from 46 percent in March. The share of manufacturing sector GDP registering a composite PMI® calculation at or below 45 percent (a good barometer of overall manufacturing weakness) was 18 percent in April, an 11-percentage point increase compared to the 7 percent reported in March. Of the six largest manufacturing industries, four (Petroleum & Coal Products; Computer & Electronic Products; Machinery; and Chemical Products) expanded in April, one more as compared to March,” says Fiore.
