Manufacturing Advanced Again in April

Written by Peter Wright

The Institute of Supply Management released their April report on May 1st. The April PMI registered 54.9 percent up from 53.7 percent in March. Any number >50 indicates expansion and this was the eleventh straight month for which this was the case. The three month moving average (3MMA), which had declined for the last three months, turned around and improved from 52.7 to 53.9 meaning that the expansion accelerated (Figure 1).

Table 1 shows the break down for April by sub component with the 3MMA, the m/m growth and the y/y growth for each. This table looks dramatically different from the version we published last month when eleven cells were red indicating a reduction in growth rate.

The official news release reads as follows:

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee. “The April PMI registered 54.9 percent, an increase of 1.2 percentage points from March’s reading of 53.7 percent, indicating expansion in manufacturing for the 11th consecutive month. The New Orders Index registered 55.1 percent, equal to the reading in March, indicating growth in new orders for the 11th consecutive month. The Production Index registered 55.7 percent, slightly below the March reading of 55.9 percent. Employment grew for the 10th consecutive month, registering 54.7 percent, an increase of 3.6 percentage points over March’s reading of 51.1 percent. Comments from the panel generally remain positive; however, some expressed concern about international economic and political issues potentially impacting demand.”

Of the 18 manufacturing industries, 17 are reporting growth in April in the following order: Apparel, Leather & Allied Products; Primary Metals; Furniture & Related Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Transportation Equipment; Fabricated Metal Products; Machinery; Printing & Related Support Activities; Plastics & Rubber Products; Textile Mills; Chemical Products; Computer & Electronic Products; Wood Products; Paper Products; Petroleum & Coal Products; and Electrical Equipment, Appliances & Components. The only industry reporting contraction in April is Nonmetallic Mineral Products.

Moody’s summarized as follows in; “Factory conditions improved in April as the ISM manufacturing index advanced 1.2 points to 54.9. The increase was in line with expectations of a modest rally in activity. The details were mixed with the employment measure rising to 54.7, its highest reading since December. The new export orders and imports index also contributed to the increase in April. Meanwhile, the production and new orders measures went largely unchanged and remain well below the level in the second half of last year when manufacturing was doing well. All told, the ISM manufacturing index was better than expected, proving that activity is heating up along with the weather.”

Explanation: The Manufacturing ISM Report On Business is published monthly by the Institute for Supply Management, the first supply institute in the world. Founded in 1915, ISM exists to lead and serve the supply management profession and is a highly influential and respected association in the global marketplace. ISM’s mission is to enhance the value and performance of procurement and supply chain management practitioners and their organizations worldwide. This report has been issued by the association since 1931, except for a four-year interruption during World War II. The report is based on data compiled from purchasing and supply executives nationwide. Membership of the Manufacturing Business Survey Committee is diversified by NAICS, based on each industry’s contribution to gross domestic product (GDP). The PMI is a diffusion index. Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. A PMI reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. A PMI in excess of 42.2 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 42.2 percent, it is generally declining. The distance from 50 percent or 42.2 percent is indicative of the strength of the expansion or decline. With some of the indicators within this report, ISM has indicated the departure point between expansion and decline of comparable government series, as determined by regression analysis.

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