The Institute for Supply Management (ISM) said that its purchasing managers’ index (PMI) rose from 53.4 in March to 54.8 in April. This is the 33rd consecutive month for the PMI to be above 50, signifying continuing expansion for manufacturers.
Given the degree to which so many of the other sentiment surveys have dipped of late, the increase was somewhat unexpected. This is the strongest reading since June of last year, and it follows two months of slightly weaker growth relative to the gains seen in January.
For the most part, the various subcomponents tell the same story. New orders, production and employment grew at a faster pace in April. New orders, for instance, moved from 54.5 to 58.2 for the month. This is a good sign of growth moving ahead, and one of the encouraging signs is that new export sales also jumped higher (from 54.0 to 59.0). Inventories contracted for the month, and pricing pressures remained unchanged (but still highly elevated).
The sample respondent comments mirrored this upbeat report, but they also reflect the mixed picture for manufacturers that we have seen all year. Some of those taking the survey cited strong sales growth, with expectations for this to continue. One manufacturer wrote, “Positive increases in volume of sales and orders, and slight uptick in inventories, indicate the overall outlook remains robust through summer at least.”
Yet, others were seeing some weaknesses, noting domestic challenges as well as persistent worries about Europe.
In short, today’s report is welcome, especially with so many of the other surveys showing manufacturing activity easing in the past month or two. Stronger growth in many of the indicators also foretells additional production and job creation in the coming months, mirroring the more upbeat expectations for the rest of 2012 observed in other data. Of course that does not mean that worries are not there. The comments show that despite headwinds and anxieties manufacturers are continuing to expand.
Chad Moutray is chief economist, National Association of Manufacturers.