ISM Reports Strong Manufacturing Performance So Far

Continuing the growth pattern laid out in the first quarter, manufacturing growth to start the second quarter in April was strong, according to the monthly Manufacturing Report on Business released by the Institute for Supply Management (ISM).

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Continuing the growth pattern laid out in the first quarter, manufacturing growth to start the second quarter in April was strong, according to the monthly Manufacturing Report on Business released by the Institute for Supply Management (ISM).

The PMI, the index used by the ISM to measure manufacturing activity, saw a 1.2 increase from March to 54.9 in April, which is 0.5 percent above the 12-month average of 54.4. The PMI is still over the 50 mark—which is the benchmark of strong economic activity—in 16 of the last 17 months, coupled with the overall economy growing for 59 consecutive months, according to the ISM.

For the report’s four key metrics, including PMI, two were up, one was flat, and one declined. New orders, often known as the engine driving manufacturing, held firm at 55.1 and remained in growth mode for the 11th month in a row. Production dropped 0.2 percent to 55.7, and employment showed growth for the tenth straight month, heading up 3.6 percent to 54.7.

ISM noted in the report that comments from its member panel included in the report “generally remain positive,” although some members voiced concern over international economic and political issues potentially impacting demand.

A fabricated metal products respondent said that the winter weather has slowed down order intake but not inquiries, adding that his company believes there is pent-up demand waiting for the winter to break. And an electrical equipment, appliances, and components respondent said there was a softening in bookings, while shipments remain at the same level. On the geopolitical front, a miscellaneous manufacturing respondent stated that Russia may stop importing medical devices manufactured completely outside of Russia, which would have a big negative impact at 5-to-10 percent lost revenue.

“There is a lot to like about this report, with 17 of 18 industries reporting growth and also the PMI has progressively increased month-over-month every month since January,” said Bradley J. Holcomb, CPSM, CPSD, chair of the ISM Manufacturing Business Survey Committee, in an interview. “Despite the harsh weather and sort of soft beginning to the year, things are set up really well for a continuation of this story.”

Even though new orders growth was flat at 55.1, Holcomb said it still represents good solid growth, with 13 industries reporting new orders’ growth in the report and only one reporting a decrease and four standing pat.
And he described the 3.6 percent increase in employment as a bit of a catch up, as well as a lead indicator that manufacturing sees a continuation of good orders in its order books, too.

Supplier deliveries in April slowed down at a faster rate to 55.9 from 54.0 in March (under 50 indicates faster deliveries).

“This number is in a good place and shows good management and north of 50, which we like in an environment you see improving and continuous growth and don’t want to be caught short with inventory in an environment like we have now,” he said.

 

 


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