"We seem to be in a season of contradictions."
U.S. manufacturing activity contracted for a sixth straight month in April, although the sector performed marginally better compared to March. This is according to the latest survey of purchasing executives from the Institute for Supply Management.
The ISM reports its index of manufacturing activity inched up 0.8% to a reading of 47.1%, demonstrating that while the sector remains in contraction (any reading below 50 indicates contraction), conditions improved somewhat over last month.
This was most evident in the new orders index, which climbed 1.4% to a reading of 45.7, indicating an uptick in demand. Meanwhile, the production index climbed 1.1% to a reading of 48.9%.
Prices ramped up in April, with the ISM prices index rebounding into expansion territory, with a reading of 53.2. Employment also moved into expansion, registering 50.2% after climbing 3.3%.
Said Timothy Fiore, Chairman of the ISM. “New order rates remain sluggish as panelists remain concerned about when manufacturing growth will resume. Panelists’ comments registered a 1-to-1 ratio regarding optimism for future growth and continuing near-term demand declines. Supply chains are prepared and eager for growth, as panelists’ comments support reduced lead times for their more important purchases. Price instability remains and future demand is uncertain as companies continue to work down overdue deliveries and backlogs. Seventy-three percent of manufacturing gross domestic product (GDP) is contracting, up from 70 percent in March. However, fewer industries contracted strongly; the proportion of manufacturing GDP with a composite PMI® calculation at or below 45 percent — a good barometer of overall manufacturing weakness — was 12 percent in April, compared to 25 percent in March.”
Five out of eighteen industries reported growth in the month of April: printing & related support activities; apparel, leather & allied products; petroleum & coal products; fabricated metal products; and transportation equipment. The industries that contracted the sharpest included furniture & related products; wood products; and nonmetallic minerals.
“Season of Contradictions”: What Manufacturers Are Saying About Business Conditions
Comments from manufacturers were mixed, revealing a plethora of concerns and challenges, from staffing issues to waning demand to continued supply chain disruptions. Generally, however, there does not seem to be a common theme that defines the climate at present, with some companies reporting strong growth, while others are navigating increasingly challenging environments.
One executive in the primary metals sector reported, “We seem to be in a season of contradictions. Business is slowing, but in some ways, it isn’t. Prices for some commodities are stabilizing, but not for others. Some product shortages are over, others aren’t. Trucking is more plentiful, except when it isn’t. There’s uncertainty one day, but not the next. The next couple of months should provide answers — or not. It’s hard to make projections at the moment”
Another in the machinery sector stated, ““Customers seem to be quite heavy on inventory (as is my employer). This has made for a significant slowdown in sales orders for the last number of months.”
While another in the miscellaneous manufacturing sector had this to say, “Business conditions remain strong, with sales and bookings exceeding plan. The backlog continues to grow due to increased bookings and supply chain constraints on electronic components.”
One panelist in the chemicals sector provided this overview, “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.”
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