The manufacturing sector in the U.S. continued to expand but the underlying details revealed signs of weakness, according to the results of two separate purchasing managers’ surveys released Friday. The U.S. dollar Index fell amid the release of the reports, reflecting traders’ concerns about the economic uncertainty that has come to manifest in activity readings.
National Survey Underwhelms: The Institute of Supply Management’s national manufacturing survey showed the headline purchasing managers’ index (PMI) holding steady at 52.7 in April, although below the consensus estimate of 53.1. A reading above ‘50’ suggests expanding activity.
The overall economy has now expanded for the 18th month in a row now.
Here’s how the other indices fared:
- The new orders index expanded for a fourth straight month, edging up 0.6 points to 53.5.
- The production index fell 1.7 points to 55.1.
- The backlog of orders declined 3 points to 51.4.
- The employment index fell further into contraction territory. (down 2.3 points to 46.4).
- The prices index jumped 6.3 points to 84.6.
- The supplier deliveries index rose 1.7 points to 60.6. (A reading above 50 indicates slower deliveries.
- The new export orders index slipped 2 points to 47.9, and the imports index moved down 2.3 points, and yet remained in expansion territory (50.3).
- The inventories index rose 1.9 points to 49.
Commenting on the data, ISM Chair Susan Spence noted that in the second month of the Iran War, 31% of the comments were positive and 69% negative, with a positive to negative sentiment ratio of 1 to 2.2. “Among comments, the war was mentioned in 47 percent and tariffs in 18 percent.”
Private Survey Show Inventory Stocking Boost: The S&P Global’s final U.S. manufacturing PMI reading, however, pointed to a stronger improvement in April than in March. The headline index improved to 54.5 in April from 52.3 in March, signaling the strongest expansion since May 2022. It also represented an upward revision from the flash reading of 54.
The upside was primarily attributed to production and order books that expanded at the fastest pace in four years. That said, the improvement was commonly linked to stock building efforts, as surging raw material prices and supply-chain disruptions pushed firms to build inventories amid delays and inflationary pressures.
Inflationary pressure picked up pace, with input and output prices rising at the fastest pace in 10 months. “There was also evidence that higher cost burdens influenced hiring decisions as the non-replacement of voluntary leavers pushed employment levels lower for the first time in nine months,” S&P Global said.
S&P Global Market Intelligence Chief Business Economist Chris Williamson said, “The surge in manufacturing activity in April is not the cause for cheer that at first glance suggests.” “A key driving force behind the upturn is the need for companies to get ahead of further feared price rises and supply shortages, providing a short-term boost that could fade in the coming months as headwinds to the economy continue to build.”
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