US Manufacturing Sector Continues to Shrink, ISM PMI Sub-50.0% for Sixth Consecutive Month

The ISM Manufacturing Index edged higher to 47.1 in April of 2023 from 46.3 in March, as it trys to recover from the lowest since May 2020. The report reflects a general contraction in manufacturing activity and marks the sixth straight month with a sub-50.0% reading. The result was consistent with the regional Chicago PMI’s seventh consecutive month of contraction in business activity in the Chicago region. Clearly the cumulative effect of rate hikes around the globe is adversely impacting demand, evidenced by the eight straight contraction in the new orders index, though it increased to 45.7% from 44.3%.

On a positive note, two of the six biggest manufacturing industries registered growth; Petroleum & Coal Products and Transportation Equipment.

 April ISM Manufacturing Index Highlights

  • ISM Manufacturing PMI 47.1 versus 46.8 last month
  • prices paid 53.2 versus 49.0 estimate and 49.2 last month
  • employment 50.2 versus 46.9 last month
  • new orders 45.7 versus 44.3 last month
  • production 48.9 versus 47.8 last month
  • supply deliveries 44.6 versus 44.8 last month
  • inventories 46.3 versus 47.5 last month
  • customer inventories 51.3 verse 48.9 last month
  • backlog of orders 43.1 versus 43.9 last month
  • new export orders 49.8 versus 47.6 last month
  • imports 49.9 versus 47.9 last month

PMI Survey Respondents Comments

  • “Having invested heavily to de-risk the supply chain over the last three years due to COVID-19, we are looking to reset with a number of our suppliers to reduce inventory, which has grown steadily over that period. Lead times are generally coming down, although electronic components are still a concern.” [Computer & Electronic Products]
  • “Business continues to contract, albeit slowly year over year. We are burning existing inventory when possible and catching up on orders. Suppliers are shipping materials at a faster pace, especially to get the payable process started at the end of the first quarter. Employment is steady, with manpower decisions based on expected order flow in the second quarter, which is subject to change. Staffing levels in our sector are not decreasing, but employment openings are slowing across the economy, which reduces the pool of replacement candidates. We are currently projecting that the third quarter will see some improvement in business, especially in our metals coating for the aerospace industry. But unforeseen circumstances — international or domestic — could change things quickly.” [Chemical Products]
  • “Pricing pressures continue to plague daily operations. After consecutive years of inflation and aggressive pricing to our retailers, we are starting to see resistance in the willingness to pass along pricing to end consumers. Discounting has entered into conversations.” [Food, Beverage & Tobacco Products]
  • “Business is steady. Closely monitoring demand going forward to detect a negative trend.” [Transportation Equipment]
  • “Customers seem to be quite heavy on inventory (as is my employer). This has made for a significant slowdown in sales orders for the last number of months.” [Machinery]
  • “Faster deliveries and shorter lead times from suppliers. … Customers starting to talk build rate reductions for the second half of 2023.” [Fabricated Metal Products]
  • “Business conditions remain strong, with sales and bookings exceeding plan. The backlog continues to grow due to increased bookings and supply chain constraints on electronic components.” [Miscellaneous Manufacturing]
  • “Sales continue to be soft, similar to 2019 pre-COVID. Expect softness to last for as long as another two years.” [Electrical Equipment, Appliances & Components]
  • “Business is picking up a bit in the automotive and construction industries — not on par with 2022 but beginning to look better.” [Plastics & Rubber Products]
  • “We seem to be in a season of contradictions. Business is slowing, but in some ways, it isn’t. Prices for some commodities are stabilizing, but not for others. Some product shortages are over, others aren’t. Trucking is more plentiful, except when it isn’t. There’s uncertainty one day, but not the next. The next couple of months should provide answers — or not. It’s hard to make projections at the moment.” [Primary Metals]

Source ISM World

From The TradersCommunity News Desk