The March ISM manufacturing index registered 55.4, missing expectations of a 57.6 print. The index fell 1.7 percentage points from the March reading of 57.1.
New orders fell by 0.3 percentage points to 53.5, while new export orders fell by 0.5 percentage points to 52.7.
The backlog of orders sub-index came in at 56.0, falling 4.0 percentage points from March’s 60.0 print.
The production index decreased 0.9 percentage points to 53.6, while the employment index fell 5.4 percentage points to 50.9.
The supplier deliveries sub-index rose to 67.2 points from 65.4 in March. The sub-index continues to reflect difficulties in improving delivery rates due to production issues related to the pandemic.
17 of 18 manufacturing industries reported growth in January. Growth was led by Apparel, Leather & Allied Products; Machinery; Plastics & Rubber Products; Nonmetallic Mineral Products; Computer Electronic Products; and Food, Beverage & Tobacco Products.
Key Implications
The manufacturing sector continues to expand but the PMI has now contracted for the second consecutive month and has recorded its lowest reading since July 2020.
On the supply side, inventories expanded at their slowest rate since July 2021 and supplier delivery times expanded at their fastest pace since last November. Looking forward, the ongoing lockdowns in China threaten to renew bottlenecks in deliveries, raising the prospect of renewed inventory drawdowns. Moreover, rising energy prices are helping push transportation and production costs higher. With strong wage growth supporting demand, these costs will continue to be passed on to consumers, adding pressure to goods inflation.
April’s ISM reflects an economy that continues to expand despite facing increasing headwinds. Employment in the manufacturing sector registered only a moderate expansion while the production subindex has continued to trend downwards. With the global outlook becoming increasingly gloomy and U.S. consumers shifting spending away from manufactured goods, it could be a bumpy ride over the coming months.
