April Manufacturing ISM Report on Business; PMI at 50.8%

Estimated reading time: 4 minutes

Economic activity in the manufacturing sector expanded in April for the second consecutive month, while the overall economy grew for the 83rd consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management(ISM) Manufacturing Business Survey Committee. "The April PMIregistered 50.8%, a decrease of 1 percentage point from the March reading of 51.8%. The New Orders Index registered 55.8%, a decrease of 2.5 percentage points from the March reading of 58.3%. The Production Index registered 54.2%, 1.1 percentage points lower than the March reading of 55.3%. The Employment Index registered 49.2%, 1.1 percentage points above the March reading of 48.1%. Inventories of raw materials registered 45.5%, a decrease of 1.5 percentage points from the March reading of 47%. The Prices Index registered 59%, an increase of 7.5 percentage points from the March reading of 51.5%, indicating higher raw materials prices for the second consecutive month. Manufacturing registered growth in April for the second consecutive month, as 15 of our 18 industries reported an increase in new orders in April (up from 13 in March), and 15 of our 18 industries reported an increase in production in April (up from 12 in March)."

Of the 18 manufacturing industries, 11 are reporting growth in April in the following order: Wood Products; Printing & Related Support Activities; Paper Products; Plastics & Rubber Products; Primary Metals; Fabricated Metal Products; Chemical Products; Machinery; Computer & Electronic Products; Nonmetallic Mineral Products; and Food, Beverage & Tobacco Products. The four industries reporting contraction in April are: Petroleum & Coal Products; Transportation Equipment; Miscellaneous Manufacturing; and Furniture & Related Products.

APRIL 2016 MANUFACTURING INDEX SUMMARIES

PMI

Manufacturing expanded in April as the PMI^® registered 50.8%, a decrease of 1 percentage point from the March reading of 51.8%, indicating growth in manufacturing for the second consecutive month, following five consecutive months of contraction in manufacturing. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMIabove 43.2%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the April PMI indicates growth for the 83rd consecutive month in the overall economy, while indicating growth in the manufacturing sector for the second consecutive month. Holcomb stated, "The past relationship between the PMI^® and the overall economy indicates that the average PMI^® for January through April (50.1%) corresponds to a 2.2% increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI^® for April (50.8%) is annualized, it corresponds to a 2.4% increase in real GDP annually."

New Orders

ISM's New Orders Index registered 55.8%in April, which is a decrease of 2.5 percentage points when compared to the 58.3% reported for March, indicating growth in new orders for the fourth consecutive month. A New Orders Index above 52.2%, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

The 15 industries reporting growth in new orders in April — listed in order — are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Paper Products; Wood Products; Plastics & Rubber Products; Chemical Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Machinery; Furniture & Related Products; Primary Metals; Computer & Electronic Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Transportation Equipment. The only industry reporting a decrease in new orders during April is Textile Mills.

Production

ISM's Production Index registered 54.2% in April, which is a decrease of 1.1 percentage points when compared to the 55.3% reported for March, indicating growth in production in April for the fourth consecutive month. An index above 51.3%, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.

The 15 industries reporting growth in production during the month of April — listed in order — are: Paper Products; Wood Products; Chemical Products; Plastics & Rubber Products; Fabricated Metal Products; Printing & Related Support Activities; Primary Metals; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Machinery; Furniture & Related Products; Transportation Equipment; and Food, Beverage & Tobacco Products. The two industries reporting a decrease in production during April are: Petroleum & Coal Products; and Textile Mills.

Employment

ISM's Employment Index registered 49.2% in April, which is an increase of 1.1 percentage points when compared to the 48.1% reported for March, indicating contraction in employment for the fifth consecutive month, but at a slower rate of contraction than in March. An Employment Index above 50.6%, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Of the 18 manufacturing industries, in April, the 11 industries reporting employment growth — listed in order — are: Wood Products; Textile Mills; Printing & Related Support Activities; Paper Products; Primary Metals; Machinery; Furniture & Related Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Chemical Products. The five industries reporting a decrease in employment in April are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Transportation Equipment.