U.S. Manufacturing Activity Kept Strong Momentum in April But Supply-Chain Woes Hit — ISM
U.S. manufacturing activity continued to expand solidly in April amid strong demand although supply chain constrains remain a significant challenge for many producers, data from a survey compiled by the Institute for Supply Management showed Monday.
The ISM Manufacturing Report on Business PMI came in at 60.7 in April, down from 64.7 in March. The reading missed expectations from economists polled by The Wall Street Journal, who forecast the index to increase to 65.0.
The PMI data for April signal that factory activity across the U.S. expanded strongly in the month, with four of the five subindexes that form the headline index in growth territory.
Demand for goods remain strong, but supply-chain issues acted as a drag in production, the report said.
“Survey Committee Members reported that their companies and suppliers continue to struggle to meet increasing rates of demand due to coronavirus impacts limiting availability of parts and materials,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee.
A PMI reading above 50 indicates that the manufacturing economy is generally expanding, while below 50 indicates that it is generally declining. The ISM indicator shows that activity has been in expansion territory since June 2020.
The expansion in the manufacturing sector is broad-based across industry groups and it has further to run in light of tight inventories, but could also lose some steam as consumers switch expenditure toward services amid the full reopening of the economy, economists say.
In April, demand and consumption continued to expand, but at a lower pace compared with March. The production index fell to 62.5 from 68.1 the previous month, while the new orders index eased to 64.3 from 68.0. However, customers’ inventories index hit another all-time low at 28.4, and the backlog of orders index continued at a record-high level of 68.2.
The employment index eased somewhat to 55.1 from 59.6 in March, but remained in expansion territory.
“Worker absenteeism, short-term shutdowns due to part shortages, and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential,” Mr. Fiore said.
Firms continued to report widespread input-driven constraints to production expansion at lower rates compared with March due to an undesired inventory draw down, the report said.
The supplier delivery index declined slightly to 75.0 from 76.6 the prior month, while the inventories index fell to contraction territory at 46.5.
“Recent record-long lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are continuing to affect all segments of the manufacturing economy,” Mr. Fiore said.
The prices index rose to 89.6 from 85.6 in March, the data showed.
All of the six biggest industry sectors reported moderate to strong growth in April, the report said.
The manufacturing PMI data also signaled that the U.S. overall economic activity is growing, as a reading above 42.8 over a period of time generally indicates an expansion of the economy. This is the eleventh consecutive month in which the PMI indicates such expansion.
Source: Dow Jones