The Institute for Supply Management (ISM) said that manufacturing activity continued to expand modestly in April, even as it pulled back for the second straight month from February’s best reading since May 2004. The ISM Manufacturing Purchasing Managers’ Index (PMI) declined from 60.8 in February to 59.3 in March to 57.3 in April, its lowest level since July 2017. Softer production (down from 61.0 to 57.2), exports (down from 58.7 to 57.7) and employment (down from 57.3 to 54.2) growth help to explain the softer headline number in April. The exports figure eased for the second consecutive month, down from the February rate, which had been the fastest since April 2011.
Despite some weakening in other measures, new orders (down from 61.9 to 61.2) decelerated slightly but remained robust overall, which was encouraging. To illustrate just how strong demand has been in the manufacturing sector, it was the 12th straight month with the new orders index at 60 or higher—a threshold that would suggest robust sales growth. The sample comments tend to echo that finding, with respondents noting healthy growth in activity and a promising outlook, even as they cite some trade worries.
With ever-stronger economic growth, manufacturers report accelerated input costs. Indeed, prices for raw materials (up from 78.1 to 79.3) have remained highly elevated, with the measure at a level not seen in seven years. More than 61 percent of manufacturing respondents said that their costs had risen in April, with just 2.6 percent suggesting that they were lower. This reflects a rebound in some commodity costs, even as overall pricing pressures continue to be largely modest, at least for now.
In other news, inventories (down from 55.5 to 52.9) expanded in April for the fourth straight month, even as the pace of growth slowed from February’s near eight-year high. More than anything, the recent growth in inventories is consistent with the healthy growth in overall production.