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Economic activity in the US manufacturing sector expanded in April for the fourth consecutive month, according to the latest ISM Manufacturing PMI Report. Of the five subindexes that make up the PMI, the New Orders and Supplier Deliveries indexes indicated faster growth compared with the previous month, the Production Index grew at a slower rate, and the Employment and Inventories indexes remained in contraction.
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 with March. New Orders expanded slightly for the fourth straight month after four straight readings in contraction, registering 54.1 percent, up 0.6 percentage points compared with 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 1.7 percentage points compared with March, and the Employment Index decreased by 2.3 percentage points and remains in contraction. Among panelists, 60 percent indicated that managing headcounts remains the norm at their companies as opposed to hiring, and of those managing headcounts, 34 percent are using layoffs and 43 percent are using attrition or not backfilling positions.
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, up 1.9 percentage points compared with March, 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 since April 2022, when it was also at 84.6 percent. In the last three months, the Prices Index has increased 25.6 percentage points to reach its highest level since April 2022 (84.6 percent). The Imports Index lost 2.3 percentage points for a reading of 50.3 percent.
Nineteen percent of the sector’s gross domestic product (GDP) contracted in April, compared with 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 with 4 percent in March. Of the six largest manufacturing industries, four (Transportation Equipment; Machinery; Computer & Electronic Products; and Chemical Products) expanded in April.
The 13 manufacturing industries reporting growth in April—listed in order—were: Textile Mills; Nonmetallic Mineral Products; Primary Metals; Plastics & Rubber Products; Miscellaneous Manufacturing; Transportation Equipment; Machinery; Electrical Equipment, Appliances & Components; Paper Products; Fabricated Metal Products; Computer & Electronic Products; Chemical Products; and Furniture & Related Products. The three industries reporting contraction in April were: Wood Products; Petroleum & Coal Products; and Food, Beverage & Tobacco Products.
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