Manufacturing Activity Declines

Economic activity in the manufacturing sector expanded in April, and the overall economy grew for the 108th consecutive month, according to  supply executives in the latest Manufacturing ISM® Report On Business®.

Economists had forecasted the ISM index to come in at a level of 58.5, however the actual reading came weaker at 57.3. That shortfall of 1.2 points represented the weakest headline reading since  July 2017.  While the April report did not meet exceptions, the ISM index was at its highest level since 2004.

Overall, the manufacturing sector remains strong based on a strengthening global economy. The weakening U.S. dollar, which increases the competitiveness of American-made goods on the global market. The Institute for Supply Management (ISM) survey published on Tuesday also showed a jump in the cost of raw materials, with prices for steel and other materials increasing because of tariffs imposed by the Trump administration.

“The April PMI® registered 57.3 percent, a decrease of 2 percentage points from the March reading of 59.3 percent. The New Orders Index registered 61.2 percent, a decrease of 0.7 percentage point from the March reading of 61.9 percent,” said Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. “The Production Index registered 57.2 percent, a 3.8 percentage point decrease compared to the March reading of 61 percent. The Employment Index registered 54.2 percent, a decrease of 3.1 percentage points from the March reading of 57.3 percent.”

The Supplier Deliveries Index registered 61.1 percent, a 0.5 percentage point increase from the March reading of 60.6 percent. The Inventories Index registered 52.9 percent, a decrease of 2.6 percentage points from the March reading of 55.5 percent. The Prices Index registered 79.3 percent in April, a 1.2 percentage point increase from the March reading of 78.1 percent, indicating higher raw materials prices for the 26th consecutive month. Comments from the panel reflect continued expanding business strength. Demand remains strong, with the New Orders Index at 60 or above for the 12th straight month, and the Customers’ Inventories Index remaining at low levels. The Backlog of Orders Index continued expanding, with its highest reading since May 2004, when it registered 63 percent. Consumption, described as production and employment, continues to expand, but has been restrained by labor and skill shortages. Inputs, expressed as supplier deliveries, inventories and imports, declined overall, due primarily to inventory reductions likely led by supplier performance restrictions. Lead time extensions, steel and aluminum disruptions, supplier labor issues, and transportation difficulties continue. Export orders remained strong. The Prices Index is at its highest level since April 2011, when it registered 82.6 percent. In April, price increases occurred across 17 of 18 industry sectors. Demand remains robust, but the nation’s employment resources and supply chains continue to struggle.”

Of the 18 manufacturing industries, 17 reported growth in April, in the following order: Wood Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Transportation Equipment; Furniture & Related Products; Paper Products; Machinery; Primary Metals; Nonmetallic Mineral Products; Chemical Products; Computer & Electronic Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Printing & Related Support Activities; Miscellaneous Manufacturing; and Apparel, Leather & Allied Products. No industry reported a decrease in PMI® in April compared to March.

Read the April 2018 ISM Manufacturing Report

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