Despite a 1.5 percentage point decrease in March, manufacturers were optimistic about industry growth moving out of the first quarter of 2018. Showing similar signs, the Institute for Supply Management (ISM) Purchasing Managers Index (PMI) again dropped in April. With a decrease of 2.0 percentage points from March’s 59.3 reading to 57.3 in April, what do these changes mean for manufacturers — especially after February’s 14-year high?
Growing
To understand long-term manufacturing trends, it’s important to first look at monthly increases causing continued growth in the sector. Readings of 50 percentage points or more indicate expansion, and all but one index are above that mark. Here are the individual factors leading to manufacturing industry growth in the U.S. in April, marking the 108th straight month of overall economic gains and the 20th consecutive month of manufacturing industry activity expansion, according to the April Manufacturing ISM Report on Business:
- Supplier Deliveries — Up half a point to 61.1
- Customers’ Inventories — Increased 2.3 points to 44.3
- Prices — Grew 1.2 points to 79.3
- Backlog of Orders — Improved by 2.2 points to 62.0
In April, no manufacturing indexes remained the same. However, Supplier Deliveries was the only index slowing and Customers’ Inventories the only index ranking too low. All others were either growing or increasing.
Growing more slowly
Even with the broader economic and manufacturing growth, quite a few indexes saw decreases in April, yet all of these were growing. In addition to the manufacturing PMI decrease, individual index declines include:
New Orders — Down 0.7 points to 61.2- Production — Slipped 3.8 points to 57.2
- Employment — Decreased 3.1 points to 54.2
- Inventories — Slid 2.6 points to 52.9
- New Export Orders — Dropped 1.0 point to 57.7
- Imports — Fell 1.9 points to 57.8
Even amid these decreases, manufacturers remain optimistic as 17 of 18 sector industries reported growth in April. Chemical manufacturing sales are strong in Asia, Europe, and the U.S. while transportation equipment manufacturers’ “Business is off the charts.” In addition, machinery demand is up. Because of the boom in the transport and machinery business, however, food, beverage, and tobacco product manufacturers have seen delivery time impacts. In addition, with steel tariffs, transport and machinery manufacturers seem to be feeling the same impacts as fabricated metal product manufacturers who, like others, are having difficulty sourcing materials. Still, optimism continues among nonmetallic mineral product manufacturers with positive outlooks, plastics and rubber products manufacturers who are still seeing strong production orders, primary metals manufacturers experiencing good business conditions at near capacity, as well as computer and electronic product manufacturers who have strong back orders.