The Economy

US Manufacturing Activity Showed Continued Vigor in April, Monthly Index Indicates

May 1, 2018

However, tight labor markets and supply chain disruptions are slowing growth.

U.S. manufacturing activity remained robust in April but the pace of growth slowed, according to the Institute for Supply Management’s monthly Manufacturing ISM Report on Business.

The April PMI registered 57.3%, the second consecutive monthly decrease and down two percentage points from the March reading of 59.3%. That said, February’s PMI, which came in at 60.8%, was the highest recorded in the past 12 months.

A reading above 50% indicates that the manufacturing industry generally is growing, while a reading below 50% indicates general contraction.

Here are five additional takeaways from the April report:

The April PMI indicates the 20th straight month of growth in the manufacturing sector. The strong growth was “led by continued expansion in new orders, production activity, employment and inventories, with suppliers continuing to struggle delivering to demand,” said Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee, at the report’s release Tuesday morning. The reading also indicates overall economy growth for the 108th consecutive month.
The PMI’s production index fell below 60 for the first time in 10 months. The production index decreased by 3.8 percentage points to 57.2 in April. “Production expansion continues,” noted Fiore, “Labor constraints and supply chain disruptions continue to prevent or limit maximum production potential.” Fifteen industries reported growth in April, with only paper products showing a decline.
Employment expansion slows, but grows, for 19th consecutive month. The ISM employment index registered 54.2 in April, a decrease of 3.1 percentage points from March. “Many respondents continue to see the labor market as a constraint to their production and their suppliers’ production,” Fiore said.
Supplier deliveries slowed in April for the 19th consecutive month. The ISM supplier deliveries index registered 61.1, up 0.5 percentage points. A reading above 50 indicates slowing deliveries. “Lead-time extensions in many areas, supplier labor shortages, and transportation delays and uncertainty in the steel and aluminum markets will continue to restrict production output for the foreseeable future,” predicted Fiore.
Raw material prices rose again. The ISM prices index was 79.3, up 1.2 percentage points from the previous month. The increase indicates growth in raw materials prices for the 26th consecutive month.

The monthly Manufacturing ISM Report on Business is based on a survey, and compiled from purchasing and supply executives nationwide. Among respondents’ comments in April:

“Business is off the carts. This is causing many collateral issues: a tightening supply chain market and longer teams. Subcontractors are trading capacity up, leading to a bidding war for the marginal capacity. Labor remains tight and getting tighter.” – Transportation Equipment
“Business conditions have been good; order book is full and running around 98%.” – Primary Metals
“The recent steel tariffs have made it difficult to source material, and we have had to eliminate two products due to availability and cost of raw material.” – Fabricated Metal Products

About the Author

Jill Jusko

Bio: Jill Jusko is executive editor for IndustryWeek. She has been writing about manufacturing operations leadership for more than 20 years. Her coverage spotlights companies that are in pursuit of world-class results in quality, productivity, cost and other benchmarks by implementing the latest continuous improvement and lean/Six-Sigma strategies. Jill also coordinates IndustryWeek’s Best Plants Awards Program, which annually salutes the leading manufacturing facilities in North America.

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