Economic activity in the manufacturing sector expanded in April for the second consecutive month --albeit at a slightly slower pace -- according to the nation’s supply executives in the latest business report from the Institute for Supply Management (ISM).
“The April PMI registered 50.8 percent, a decrease of 1 percentage point from the March reading of 51.8 percent,” said Bradley J. Holcomb, chair of the ISM Manufacturing Business Survey Committee. A number above 50 indicates the industry is growing; a number under 50 indicates contraction. “The new orders index registered 55.8 percent, a decrease of 2.5 percentage points from the March reading of 58.3 percent. The production index registered 54.2 percent, 1.1 percentage points lower than the March reading of 55.3 percent,” Holcomb said.
Although the pace of growth declined slightly in April, a broader range of industries reported an uptick from March. “Manufacturing registered growth in April for the second consecutive month, as 15 of our 18 industries reported an increase in new orders in April (up from 13 in March), and 15 of our 18 industries reported an increase in production in April (up from 12 in March),” said Holcomb. Although the employment index gained 1.1 percentage points in April – to 49.2 percent from 48.1 percent—the index still hovers below 50. Inventories of raw materials registered 45.5 percent, a decrease of 1.5 percentage points from the March reading of 47 percent.
The prices index saw a dramatic surge of 7.5 percentage points to reach 59 percent in April, indicating higher raw materials prices for the second consecutive month. The increase doesn’t necessarily mean prices have increased by 7.5 percent, Holcomb explained: prices are regaining ground they lost during the past 18 months.
“Overall this is not a bad report,” Holcomb said. “New orders are down but more industries are reporting growth in April. If you have more industries participating in growth it’s a good thing.” Exports increased slightly in April, he added, indicating pent-up demand and the attenuation of the dollar on foreign markets.
Of 18 manufacturing industries, 11 are reporting growth in April in the following order: wood products; printing & related support activities; paper products; plastics & rubber products; primary metals; fabricated metal products; chemical products; machinery; computer & electronic products; nonmetallic mineral products; and food, beverage & tobacco products. the four industries reporting contraction in April are: petroleum & coal products; transportation equipment; miscellaneous manufacturing; and furniture & related products.
Respondents to the monthly questionnaire were generally positive:
- “We are still running at capacity. New CapEx for $30 million to increase capacity, but will not be online until 2017.” (Food, beverage & tobacco products)
- “Remaining a bit sluggish overall although showing signs of a pickup in some areas.” (Chemical products)
- “While oil prices have recovered slightly, the industry as a whole continues to struggle greatly.” (Computer & electronics products)
- “Steel prices are increasing, but it is supply-side driven. General economy is plugging along with no big changes. Kind of lackluster.” (Fabricated metal products)
- “Auto industry is still going strong.” (Machinery)
- “Sales are firming at the reduced levels we’ve seen this year. We think we have hit a bottom.” (Transportation equipment)
- “Business conditions are stable. Sales and production rates are steady to improving.” (Miscellaneous manufacturing)
- “Activity increasing as we move to our busy season.” (Printing & related support activities)
- “Market is starting to pick up as expected.” (Wood products)