Economic activity in the manufacturing sector expanded in April for the 28th consecutive month, and the overall economy grew for the 71st consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.
Manufacturing expanded in April as the PMI registered 51.5 percent, the same reading as in March. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee states, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through April (52.4 percent) corresponds to a 2.9 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI® for April (51.5 percent) is annualized, it corresponds to a 2.6 percent increase in real GDP annually.”
Of the 18 manufacturing industries, 15 are reporting growth in April in the following order: Nonmetallic Mineral Products; Plastics & Rubber Products; Wood Products; Printing & Related Support Activities; Furniture & Related Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Paper Products; Miscellaneous Manufacturing; Machinery; Transportation Equipment; Textile Mills; Electrical Equipment, Appliances & Components; Chemical Products; and Primary Metals. The two industries reporting contraction in April are: Apparel, Leather & Allied Products; and Computer & Electronic Products.
A PMI in excess of 43.1 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the April PMI indicates growth for the 71st consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 28th consecutive month.
Orders, Production and Inventory
ISM’s New Orders Index registered 53.5 percent in April, an increase of 1.7 percentage points when compared to the March reading of 51.8 percent, indicating growth in new orders for the 29th consecutive month. A New Orders Index above 52.1 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).
ISM’s Production Index registered 56 percent in April, which is an increase of 2.2 percentage points when compared to the 53.8 percent reported in March, indicating growth in production for the 32nd consecutive month. An index above 51.1 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.
ISM’s Backlog of Orders Index registered 49.5 percent in April, the same reading as reported in March, indicating contraction in order backlogs for the second consecutive month. Of the 85 percent of respondents who measure their backlog of orders, 25 percent reported greater backlogs, 26 percent reported smaller backlogs, and 49 percent reported no change from March.
The Inventories Index registered 49.5 percent in April, which is 2 percentage points lower than the 51.5 percent registered in March, indicating raw materials inventories are contracting in April following three consecutive months of growth in inventories. An Inventories Index greater than 42.9 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).
Exports, Imports and Prices
ISM’s New Export Orders Index registered 51.5 percent in April, which is 4 percentage points higher than the 47.5 percent reported in March. April’s reading reflects a month of growth in export orders following three consecutive months of contraction in new export orders.
ISM’s Imports Index registered 54 percent in April, which is 1.5 percentage points higher than the 52.5 percent reported in March. This month’s reading represents 27 consecutive months of growth in imports.
The ISM Prices Index registered 40.5 percent in April, an increase of 1.5 percentage points when compared to the March reading of 39 percent, indicating a decrease in raw materials prices for the sixth consecutive month. In April, 7 percent of respondents reported paying higher prices, 26 percent reported paying lower prices and 67 percent of supply executives reported paying the same prices as in March. A Prices Index above 52.1 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.
ISM’s Employment Index registered 48.3 percent in April, which is a decrease of 1.7 percentage points when compared to the 50 percent reported in March. The April reading of 48.3 percent is the lowest reading since September 2009 when the Employment Index registered 47.8 percent. An Employment Index above 50.6 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
The monthly Manufacturing ISM Report on Business is based on the survey results of approximately 350 professionals across 18 different industry sectors. The report is released on the first business day of each month and features the PMI Index as its key measure. For more information on the Institute of Supply Management, visit www.ism.ws.