After rebounding several points in March, U.S. manufacturing activity expanded at a slower rate in April, as new orders, production and employment slipped, according the Institute for Supply Management’s latest survey of manufacturing executives.
U.S. manufacturing activity now stands at 52.8%, down 2.5% from March’s reading of 55.3%.
This means that while U.S. manufacturing is still in growth mode, the sector is expanding at a slower rate. April 2019 stands as the 38th consecutive month of growth in the U.S. manufacturing sector, and the 120th straight month of growth in the economy overall.
Says Tim Fiore, Chairman of the ISM: “Comments from the panel reflect continued expanded business strength, but at the softest levels since the fourth quarter of 2016.”
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A significant drop in new orders impacted April’s reading, while employment and production also slipped. Inventories rose while prices dropped.
Thirteen of eighteen industries surveyed by the ISM in April reported growth. Leading the way was textile mills; electrical equipment, appliances & components; miscellaneous manufacturing; printing & related support activities; and chemical products.
The five sectors that reported a contraction in the month of April were apparel, leather & allied products; primary metals; wood products; petroleum & coal products; and transportation equipment.
New Orders Sink to 16-Month Low
The ISM’s New Orders Index, which rebounded in March, sank to a near-contractionary reading of 51.8%. This represents a 5.7% drop from March’s reading of 57.4%.
The New Orders Index has generally led the positive readings in manufacturing activity over the past few years. The index has remained in expansion territory for 37 consecutive months, meaning it has posted above the 50% mark that defines expansion. April’s reading, however, marks the lowest expansion reading the index has seen in December 2018.
Fourteen out of eighteen industries reported growth in new orders, according to the ISM. New order growth was led by nonmetallic mineral products; wood products; electrical equipment; electrical equipment; appliances & components; and miscellaneous manufacturing.
Industries that reported a contraction in new orders included primary metals; petroleum & coal products; and transportation equipment.
Manufacturing Production Slides
The ISM’s Production Index slid several points in February, down 3.5% to 52.3%, ranking as the 32nd consecutive month of growth, albeit at a slower rate in April.
“Production output was not able to improve customer-inventory positions and the softer expansion contributed to a growth in backlog orders,” said Fiore.
The ISM’s Backlog of Orders index grew by 3.5% in April to a level of 53.9%.
Lower production readings agree with recent industrial production readings released by the Federal Reserve, which found manufacturing output came to a virtual standstill in March.
Related: Where is U.S. Manufacturing Headed?
Fourteen out of eighteen industries reported production hikes, led by electrical equipment, appliances & components; nonmetallic mineral products; printing & related support activities; textile mills; and fabricated metals products.
Employment Slips
The ISM’s reading on employment, which stood at a near-historic high of 60.5% in January, sank 5.1% in April to a level of 52.3%. April stands as the 31st consecutive month of expanded employment in the U.S. manufacturing sector, though hiring has slowed significantly.
“Retention issues and sourcing of skilled and professional labor were noted by respondents as continuing drags on production performance,” said Fiore.
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March’s labor report also reflected slowing hiring, with jobs down overall by 6,000, after adding 261,000 jobs in 2018.
Only nine of eighteen industries surveyed by the ISM reported expanded employment in April.
Industries with the highest level of expanded hiring were furniture/related products; miscellaneous manufacturing; computer & electronics products; food, beverage & tobacco products; and fabricated metal products.
Conclusion
The ISM’s manufacturing activity index covers a multitude of growth metrics, which overall point to an industrial sector that is still steadily growing, though at a slower rate.
Additional items covered by the ISM include inventories, which increased 1.1% from the previous month; prices, which dropped 4.3%; exports, which hit a contractionary level of 49.5 (down 2.2%) and imports, which declined 1.3% and are also in contraction at 49.8%.
About the ISM
The Institute for Supply Management® (ISM®) is the first and largest not-for-profit professional supply management organization worldwide. Founded in 1915, ISM has over 50,000 members located in 100 countries.
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