According to a report released on Friday by the Institute of Supply Management, economic activity in the manufacturing sector failed to grow in April for the 15th consecutive month, and the overall economy contracted for the seventh consecutive month.
Despite the negativity the data represents, and the fact that only manufacturing industry reporting growth in April was Miscellaneous Manufacturing, there is cause for some cautious optimism. After six consecutive months below the 40% mark, the PMI, driven by the New Orders Index at 47.2%, shows a significant improvement. ISM’s Index rose to 40.1% in April, its highest level since September – beating economists modest estimates of an increase of 38.4% from the 36.3 seen in March. The rise in the index shows that the contraction in the manufacturing sector is rapidly slowing and the overall economy is heading toward recovery.
From ISM: Manufacturing contracted in April as the PMI registered 40.1 percent, which is 3.8 percentage points higher than the 36.3 percent reported in March. This is the 15th consecutive month of contraction in the manufacturing sector. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
» ISM’s New Orders Index registered 47.2 percent in April, 6 percentage points higher than the 41.2 percent registered in March.
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» ISM’s Production Index registered 40.4 percent in April, which is an increase of 4 percentage points from March’s reading of 36.4 percent.
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» ISM’s Employment Index registered 34.4 percent in April, which is 6.3 percentage points higher than the 28.1 percent reported in March.
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» The delivery performance of suppliers to manufacturing organizations was faster for the seventh consecutive month in April as the Supplier Deliveries Index registered 44.9 percent, which is 1.3 percentage points higher than the 43.6 percent registered in March.
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» Manufacturers’ inventories contracted in April as the Inventories Index registered 33.6 percent, which is 1.4 percentage points higher than March’s reading of 32.2 percent.
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» The ISM Prices Index registered 32 percent in April, 1 percentage point higher than the 31 percent reported in March.
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» ISM’s Backlog of Orders Index registered 40.5 percent in April, 5 percentage points higher than the 35.5 percent reported in March.
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» ISM’s New Export Orders Index registered 44 percent in April, 5 percentage points higher than the 39 percent reported in March.
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» Imports of materials by manufacturers contracted during April as the Imports Index registered 42 percent, 9 percentage points higher than the 33 percent reported in March. This is the 15th consecutive month of contraction in imports.
Separately: The Census Bureau reported today factory orders, which consist of the earlier announced durable goods report plus non-durable goods orders, fell by 0.9% in March (consensus 0.7%) to $345.3 billion. The new data negates the 0.7% advancement made in February. Excluding transportation, new factory orders decreased by 0.9%.
Image: ISM
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