Manufacturing PMI at 55.4%

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Economic activity in the manufacturing sector grew in April, with the overall economy achieving a 23rd consecutive month of growth, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

The report was issued by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee:

"The April Manufacturing PMI registered 55.4 percent, a decrease of 1.7 percentage points from the March reading of 57.1 percent. This figure indicates expansion in the overall economy for the 23rd month in a row after a contraction in April and May 2020. This is the lowest reading since July 2020 (53.9 percent). The New Orders Index registered 53.5 percent, down 0.3 percentage point compared to the March reading of 53.8 percent. The Production Index reading of 53.6 percent is a 0.9-percentage point decrease compared to March's figure of 54.5 percent. The Prices Index registered 84.6 percent, down 2.5 percentage points compared to the March figure of 87.1 percent. The Backlog of Orders Index registered 56 percent, 4 percentage points lower than the March reading of 60 percent. The Employment Index figure of 50.9 percent is 5.4 percentage points lower than the 56.3 percent recorded in March. The Supplier Deliveries Index registered 67.2 percent, an increase of 1.8 percentage points compared to the March figure of 65.4 percent. The Inventories Index registered 51.6 percent, 3.9 percentage points lower than the March reading of 55.5 percent. The New Export Orders Index reading of 52.7 percent is down 0.5 percentage point compared to March's figure of 53.2 percent. The Imports Index registered 51.4 percent, a 0.4-percentage point decrease from the March reading of 51.8 percent."

Fiore continues, "The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment. In April, progress slowed in solving labor shortage problems at all tiers of the supply chain. Panelists reported higher rates of quits compared to previous months, with fewer panelists reporting improvement in meeting head-count targets. April saw a slight easing of prices expansion, but instability in global energy markets continues. Surcharge increase activity across all industry sectors continues. Panel sentiment remained strongly optimistic regarding demand, though the three positive growth comments for every cautious comment was down from March's ratio of 6-to-1, Panelists continue to note supply chain and pricing issues as their biggest concerns. Demand expanded, with the (1) New Orders Index remaining in growth territory, supported by weaker growth of new export orders, (2) Customers' Inventories Index remaining at a very low level and (3) Backlog of Orders Index continuing in respectable growth territory. Consumption (measured by the Production and Employment indexes) grew during the period, though at a slower rate, with a combined minus-6.3-percentage point change to the Manufacturing PMI® calculation. The Employment Index expanded for the eighth straight month; panelists indicated limited improvement in ability to hire, but challenges with turnover (quits and retirements) and resulting backfilling continue to plague efforts to adequately staff organizations, to a greater extent compared to March. Inputs — expressed as supplier deliveries, inventories, and imports — continued to constrain production expansion. The Supplier Deliveries Index indicated deliveries slowed at a faster rate in April, while the Inventories and Imports indexes grew at slower rates. The Prices Index increased for the 23rd consecutive month, at a slower rate compared to March.

"Five of the six biggest manufacturing industries — Machinery; Computer & Electronic Products; Food, Beverage & Tobacco Products; Transportation Equipment; and Chemical Products — registered moderate-to-strong growth in April.

"Manufacturing performed well for the 23rd straight month, with demand registering slower month-over-month growth (likely due to extended lead times and decades-high material price increases) and consumption softening (due to labor force constraints). Overseas partners are experiencing COVID-19 impacts, creating a near-term headwind for the U.S. manufacturing community. Fifteen percent of panelists' general comments expressed concern about their Asian partners' ability to deliver reliably in the summer months, up from 5 percent in March," says Fiore.