EconoFACTS

May 01, 2023 | 10:43

U.S. ISM Manufacturing PMI ... Up and Yet, Still Down

Economist

Jennifer Lee

Senior Economist and Managing Director
Economics

(Read more)

Jennifer Lee

Senior Economist and Managing Director
Economics

(Read more)

Looks like a number of the regional surveys had the right idea: despite some big declines in their diffusion indexes (example: Motown Philly), their ISM-adjusted series all rose and that is what happened with the national figure.

The U.S. manufacturing ISM rose 0.8 pts to a 2-mth high of 47.1 in April, beating expectations but still the sixth consecutive month below 50 (i.e. contracting) and only the fourth increase in the past year. The latest report had decent show of support from the main components: new orders +1.4 pts to 45.7, production +1.1 pts to 45.9, employment +3.3 pts to 50.2 (first 50+ reading in 3 months .... I'll keep that on the side ahead of this Friday's payroll report), while inventories fell 1.2 pts to 46.3. Supplier deliveries were still improving, which is good news for businesses, but it weighs on the headline.

It is always just as important—if not more—to glean more intel from the respondents' comments, and they were not all bad. There were three mentions on inventory; that is, having too much of it and working the levels down. And, according to those in the Machinery sector, "this has made for a significant slowdown in sales orders." On the pricing front, some are still seeing pressures. Interesting that the Food, Beverage & Tobacco group said that they are "starting to see resistance in the willingness to pass along pricing to end consumers. Discounting has entered the conversations."

The broader comments on how activity is faring were definitely mixed, ranging from "business is slowing but in some ways, it isn't", , to "business conditions remain strong", to "sales continue to be soft." In other words, nothing that screams hard landing yet. But things are softening.

Meantime, U.S. construction spending rose more than expected, up 0.3% in March (both private and public sector spending were higher), while, as per usual, the revisions were noteworthy and, this time, offset that good news. February's -0.1% is now -0.3% and January's +0.4% is now -0.2%. Seriously.

Bottom Line: The softening continues .....

Table 1 - United States — ISM Manufacturing PMI

(percent reporting)

Source: BMO Economics, Haver Analytics