| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Index | 46.8 | 46.4 to 48.6 | 47.1 | 46.3 |
Highlights
US manufacturing activity was in contraction territory for the sixth straight month in April as new orders remained subdued amid uncertainty over the timing of recovery in demand later this year, data from the Institute for Supply Management released Monday showed.
The ISM survey also indicated that nearly equal numbers of firms are increasing or shedding head counts amid mixed sentiment about when significant growth will return.
The sector index compiled by the ISM, which shows general direction, rose 0.8 percentage points to 47.1 in April after falling 1.4 points to 46.3 in March and edging up 0.3 point to 47.7 in February. The latest figure is above the median economist forecast of 46.8.
Regarding the overall economy, this figure indicates a fifth month of contraction after a 30-month period of expansion. The ISM's manufacturing PMI reading above 48.7, over time, generally indicates an expansion of the overall economy.
The index has been on a gradual downtrend since June 2022. It remains the lowest since May 2020, when the index at 43.5 was recovering from a recent low of 41.8 the previous month during the first wave of the pandemic. The all-time low is 29.4 hit in May 1980.
"The April composite index reading reflects companies continuing to manage outputs to better match demand for the first half of 2023 and prepare for growth in the late summer/early fall period," Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement.
"We are operating in a 47 to 51 range, compared to 48 to 52 several months ago," he told reporters."I don't think anything is changing in the near term."
Fiore told reporters last month that the timing of the pickup in demand appeared to be delayed from earlier expectations of July to August, adding that index had been in a range of 48 to 52 previously and was now in a range of 46 to 49, and would be probably so in the April-June quarter.
The output side is up from new orders to production, showing positive sings as new orders are future revenues and production goes into inventories but is generally converted into sales, he told reporters Monday.
On the other hand, he said, the input side continues to be weak, especially in manufacturing inventories, which has been declining and indicates uncertainty for future demand. Customer inventories are now at the low of"too high," which is a warning bell, he added.
"Nothing in the report would indicate to me that we are going to change from that 47 to 51 (range)," Fiore concluded."The future is uncertain."
Business continues to contract, albeit slowly year over year, a chemical producer told the ISM survey."We are currently projecting that the third quarter will see some improvement in business, especially in our metals coating for the aerospace industry. But unforeseen circumstances international or domestic could change things quickly," the firm said.
"Business is steady," a transport equipment maker said."Closely monitoring demand going forward to detect a negative trend." A primary metals producer said,"The next couple of months should provide answers or not. It's hard to make projections at the moment."
Among the five subindexes that directly factor into the manufacturing PMI, the new orders index contracted for the eighth consecutive month, but edged up 0.8 points to 45.7 in April after falling 2.7 points to 44.3 in March.
The production index reading of 48.9 percent is a 1.1-percentage point increase from 47.8 in March, when it gained 0.5 point, but it is in contraction for the fifth straight month.
The employment index popped into expansion territory for the first time in four months, registering 50.2 in April, up 3.3 points from 46.9 in March, which was 2.2 points lower than the February reading of 49.1."Panelists' comments continue to indicate near equal levels of activity toward expanding and contracting head counts at their companies, amid mixed sentiment about when significant growth will return," the ISM said.
The delivery performance of suppliers to manufacturing organizations was faster for the seventh straight month. The supplier deliveries index 44.6 percent is 0.2 point lower than the 44.8 recorded in March. It remains the lowest since 43.2 in March 2009.
The inventories index fell 1.2 points to 46.3 in April from 47.5 in March, when it dipped 2.6 points from 50.1 in February.
Among other subindexes, the customers' inventories index jumped 2.4 points to 51.3 from 48.9 in March and 46.9 in February, entering the low end of 'too high' territory, a negative for future production. It was the highest in more than six years since September 2016, when it registered 52.5. The all-time high is 56.0 hit in January 2001.
The backlog orders index was at 43.1, which is 0.8 point lower than the March reading of 43.9.
The prices index stood at 53.2 in April, up 4.0 points from 49.2 in March, when it dipped 2.1 from 51.3 in February. It moved back into 'increasing' territory, at a moderate level, after one month of marginally decreasing prices.
"Price instability remains and future demand is uncertain as companies continue to work down overdue deliveries and backlogs," Fiore said.
"Pricing pressures continue to plague daily operations," a firm from the food, beverage and tobacco products category told the ISM."After consecutive years of inflation and aggressive pricing to our retailers, we are starting to see resistance in the willingness to pass along pricing to end consumers. Discounting has entered into conversation."
The new export orders index remains in contraction territory but rose 2.2 points to 49.8 in April from 47.6 in March, backed by firmer demand from Asia and Europe.
The manufacturing sector is in the sixth contracting phase in the past 20 years. Previously, the ISM manufacturing PMI posted contraction just before the pandemic hit the global economy, from August to December 2019 and from March to May 2020. The deepest slump in the past two decades was recorded from September 2008 until July 2009 (the bottom was 34.5 in December 2008) triggered by the US credit crisis.
The ISM survey also indicated that nearly equal numbers of firms are increasing or shedding head counts amid mixed sentiment about when significant growth will return.
The sector index compiled by the ISM, which shows general direction, rose 0.8 percentage points to 47.1 in April after falling 1.4 points to 46.3 in March and edging up 0.3 point to 47.7 in February. The latest figure is above the median economist forecast of 46.8.
Regarding the overall economy, this figure indicates a fifth month of contraction after a 30-month period of expansion. The ISM's manufacturing PMI reading above 48.7, over time, generally indicates an expansion of the overall economy.
The index has been on a gradual downtrend since June 2022. It remains the lowest since May 2020, when the index at 43.5 was recovering from a recent low of 41.8 the previous month during the first wave of the pandemic. The all-time low is 29.4 hit in May 1980.
"The April composite index reading reflects companies continuing to manage outputs to better match demand for the first half of 2023 and prepare for growth in the late summer/early fall period," Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement.
"We are operating in a 47 to 51 range, compared to 48 to 52 several months ago," he told reporters."I don't think anything is changing in the near term."
Fiore told reporters last month that the timing of the pickup in demand appeared to be delayed from earlier expectations of July to August, adding that index had been in a range of 48 to 52 previously and was now in a range of 46 to 49, and would be probably so in the April-June quarter.
The output side is up from new orders to production, showing positive sings as new orders are future revenues and production goes into inventories but is generally converted into sales, he told reporters Monday.
On the other hand, he said, the input side continues to be weak, especially in manufacturing inventories, which has been declining and indicates uncertainty for future demand. Customer inventories are now at the low of"too high," which is a warning bell, he added.
"Nothing in the report would indicate to me that we are going to change from that 47 to 51 (range)," Fiore concluded."The future is uncertain."
Business continues to contract, albeit slowly year over year, a chemical producer told the ISM survey."We are currently projecting that the third quarter will see some improvement in business, especially in our metals coating for the aerospace industry. But unforeseen circumstances international or domestic could change things quickly," the firm said.
"Business is steady," a transport equipment maker said."Closely monitoring demand going forward to detect a negative trend." A primary metals producer said,"The next couple of months should provide answers or not. It's hard to make projections at the moment."
Among the five subindexes that directly factor into the manufacturing PMI, the new orders index contracted for the eighth consecutive month, but edged up 0.8 points to 45.7 in April after falling 2.7 points to 44.3 in March.
The production index reading of 48.9 percent is a 1.1-percentage point increase from 47.8 in March, when it gained 0.5 point, but it is in contraction for the fifth straight month.
The employment index popped into expansion territory for the first time in four months, registering 50.2 in April, up 3.3 points from 46.9 in March, which was 2.2 points lower than the February reading of 49.1."Panelists' comments continue to indicate near equal levels of activity toward expanding and contracting head counts at their companies, amid mixed sentiment about when significant growth will return," the ISM said.
The delivery performance of suppliers to manufacturing organizations was faster for the seventh straight month. The supplier deliveries index 44.6 percent is 0.2 point lower than the 44.8 recorded in March. It remains the lowest since 43.2 in March 2009.
The inventories index fell 1.2 points to 46.3 in April from 47.5 in March, when it dipped 2.6 points from 50.1 in February.
Among other subindexes, the customers' inventories index jumped 2.4 points to 51.3 from 48.9 in March and 46.9 in February, entering the low end of 'too high' territory, a negative for future production. It was the highest in more than six years since September 2016, when it registered 52.5. The all-time high is 56.0 hit in January 2001.
The backlog orders index was at 43.1, which is 0.8 point lower than the March reading of 43.9.
The prices index stood at 53.2 in April, up 4.0 points from 49.2 in March, when it dipped 2.1 from 51.3 in February. It moved back into 'increasing' territory, at a moderate level, after one month of marginally decreasing prices.
"Price instability remains and future demand is uncertain as companies continue to work down overdue deliveries and backlogs," Fiore said.
"Pricing pressures continue to plague daily operations," a firm from the food, beverage and tobacco products category told the ISM."After consecutive years of inflation and aggressive pricing to our retailers, we are starting to see resistance in the willingness to pass along pricing to end consumers. Discounting has entered into conversation."
The new export orders index remains in contraction territory but rose 2.2 points to 49.8 in April from 47.6 in March, backed by firmer demand from Asia and Europe.
The manufacturing sector is in the sixth contracting phase in the past 20 years. Previously, the ISM manufacturing PMI posted contraction just before the pandemic hit the global economy, from August to December 2019 and from March to May 2020. The deepest slump in the past two decades was recorded from September 2008 until July 2009 (the bottom was 34.5 in December 2008) triggered by the US credit crisis.
Market Consensus Before Announcement
The ISM manufacturing index has been in contraction the last five months. April's consensus is 46.8 versus March's 46.3.
Definition
The manufacturing composite index from the Institute for Supply Management is a diffusion index calculated from five of the eleven sub-components of a monthly survey of purchasing managers at roughly 300 manufacturing firms nationwide. The survey queries purchasing managers about the general direction (tracked in volumes) of production, new orders, order backlogs, their own inventories, customer inventories, employment, supplier deliveries, exports, and imports. Data on changes in input prices (prices paid) are also tracked. The five components of the composite index are new orders, production, employment, supplier deliveries, and inventories (their own, not customer inventories). The five components are equally weighted. The questions are qualitative rather than quantitative; that is, they ask about the general direction rather than the specific level of activity. Each question is adjusted into a diffusion index which is calculated by adding the percentage of positive responses to one-half of the unchanged responses.
Description
Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM manufacturing index, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.
The ISM manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. More than one of the ISM sub-indexes provide insight on commodity prices and clues regarding the potential for developing inflation. The Federal Reserve keeps a close watch on this report which helps it to determine the direction of interest rates when inflation signals are flashing in these data. As a result, the bond market is highly sensitive to this report.
Importance
The ISM manufacturing composite index indicates overall factory sector trends. The relevance of this indicator is enhanced by the fact that it is available very early in the month and is not subject to revision.
Interpretation
The bond market will rally (fall) when the ISM manufacturing index is weaker (stronger) than expected. Equity markets prefer lower interest rates and could rally with the bond market. However, a healthy manufacturing sector, indicated by rising ISM index levels, bodes well for corporate earnings and is bullish for the stock market.
The level of the ISM manufacturing index indicates whether manufacturing and the overall economy are growing or declining. Historically, readings of 50 percent or above are associated with an expanding manufacturing sector and healthy GDP growth overall. Readings below 50 indicate a contracting manufacturing sector but overall GDP growth is still positive until the ISM index falls below 42.5 (based on statistics through January 2011). Readings in between these two levels suggest that manufacturing is declining while GDP is still growing but only very slowly.
In addition to the ISM manufacturing composite index, the various sub-components contain useful information about manufacturing activity. The production component is related to industrial production, new orders to durable goods orders, employment to factory payrolls, prices to producer prices, export orders to merchandise trade exports and import orders to merchandise imports.
Vendor (supplier) deliveries are an important component of report. The more slowly orders are filled and delivered, the stronger the economic growth and the greater the potential for inflation. When orders are filled quickly, it means that producers don't have as many to fill.
The ISM manufacturing composite index and its sub-components can be subject to some monthly volatility, making the three-month average of the monthly levels more indicative of the trend.
The ISM manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. More than one of the ISM sub-indexes provide insight on commodity prices and clues regarding the potential for developing inflation. The Federal Reserve keeps a close watch on this report which helps it to determine the direction of interest rates when inflation signals are flashing in these data. As a result, the bond market is highly sensitive to this report.
Importance
The ISM manufacturing composite index indicates overall factory sector trends. The relevance of this indicator is enhanced by the fact that it is available very early in the month and is not subject to revision.
Interpretation
The bond market will rally (fall) when the ISM manufacturing index is weaker (stronger) than expected. Equity markets prefer lower interest rates and could rally with the bond market. However, a healthy manufacturing sector, indicated by rising ISM index levels, bodes well for corporate earnings and is bullish for the stock market.
The level of the ISM manufacturing index indicates whether manufacturing and the overall economy are growing or declining. Historically, readings of 50 percent or above are associated with an expanding manufacturing sector and healthy GDP growth overall. Readings below 50 indicate a contracting manufacturing sector but overall GDP growth is still positive until the ISM index falls below 42.5 (based on statistics through January 2011). Readings in between these two levels suggest that manufacturing is declining while GDP is still growing but only very slowly.
In addition to the ISM manufacturing composite index, the various sub-components contain useful information about manufacturing activity. The production component is related to industrial production, new orders to durable goods orders, employment to factory payrolls, prices to producer prices, export orders to merchandise trade exports and import orders to merchandise imports.
Vendor (supplier) deliveries are an important component of report. The more slowly orders are filled and delivered, the stronger the economic growth and the greater the potential for inflation. When orders are filled quickly, it means that producers don't have as many to fill.
The ISM manufacturing composite index and its sub-components can be subject to some monthly volatility, making the three-month average of the monthly levels more indicative of the trend.
