The Institute for Supply Management (ISM)’s Manufacturing PMI index rose to 60.5 in April — the highest level since June 2004 — showing that the manufacturing recovery gained momentum in April. (ISM release.) The improvement was broad-based across all manufacturing industries with increases in production, new orders and employment. The export component of today’s report remained at a near two-decade high last month, underscoring how exports continue to lead the economic recovery. This is good news for manufacturing workers given that more than a quarter of manufacturing employment is supported by exports.
Given significant upturns in several regional manufacturing surveys reported last week, today’s report was not a revelation. However, the fact that no industry reported a contraction last month was a welcome surprise. While most manufacturing sectors, lead by exporters, have moved into recovery over the past several quarters, a number of industries — especially those connected to housing — have continued to struggle. The homebuyer tax credit expired last month, and the credit’s pending deadline likely spurred construction-related industrial activity in April. Thus, a short-term correction in some manufacturing activity in the next couple of months would not be a surprise in the wake of the end of the housing tax credit.
While manufacturers are leading the economic expansion, the challenge will be to sustain those advances and build a recovery capable of driving down the jobless rate.