United States: Manufacturing conditions ease in April as firms temper their post-election optimism
May 1, 2017
The ISM manufacturing index declined for a second month running in April, weighed down by rapidly moderating new order growth and a slower rate of job creation. The indicator fell from 57.2 in March to 54.8, well below market expectations of a milder decline to 56.5 in April and the worst reading since December of last year. Yet standing on its own, April’s result was still very solid, with the ISM index well above the 50-threshold that separates an expansion from a contraction in the U.S. manufacturing economy, where it has been since September of last year.
The underlying details of April’s report are quite mixed, although the overall picture is still skewed to the upside. U.S. manufacturers scaled back hiring plans in April, while demand for new products abated. Nonetheless, the strength of the latter, which should not be disregarded at 57.5 in a 100-point scale, highlights still-upbeat operating conditions among U.S. manufacturers. In fact, 16 out of 18 industries surveyed still reported growth in April. On a better note, output recovered some ground lost in March and further underscored the strength of the U.S. manufacturing economy. Inventories swung back into expansionary territory, while delays in delivery times, albeit easing slightly in April, still pointed to demand-related congestion in the supply chain. Regarding prices, although the rate of growth decelerated somewhat, input costs still rose strongly in April.
Despite April’s retreat, operations conditions were still quite brisk. Analysts have partially attributed the drop in sentiment to caution among firms as these await for growth-inducing fiscal measures to be rolled out. Indeed, purchasers’ and consumers’ sentiment has edged down in recent weeks, narrowing the disparity between hard and survey-based data that had followed Trump’s victory in the U.S. presidential elections.
Author: David Ampudia, Economist