April ISM Manufacturing Index: Demand Up, Supply Chain Issues Remain

Summary

• The latest headline Purchasing Managers' Index was 55.4, a decrease of 1.7 from 57.1 the previous month and in expansion territory.
• Today's headline number was below the Investing.com forecast of 57.6.
• For a diffusion index, the latest reading is 55.4 and indicates expansion.

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By Jill Mislinski

This morning, the Institute for Supply Management published its monthly Manufacturing Report for April. The latest headline Purchasing Managers' Index (PMI) was 55.4, a decrease of 1.7 from 57.1 the previous month and in expansion territory. Today's headline number was below the Investing.com forecast of 57.6.

Here is the key analysis from the report:

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee:

"The April Manufacturing PMI® registered 55.4 percent, a decrease of 1.7 percentage points from the March reading of 57.1 percent. This figure indicates expansion in the overall economy for the 23rd month in a row after a contraction in April and May 2020. This is the lowest reading since July 2020 (53.9 percent). The New Orders Index registered 53.5 percent, down 0.3 percentage point compared to the March reading of 53.8 percent. The Production Index reading of 53.6 percent is a 0.9-percentage point decrease compared to March's figure of 54.5 percent. The Prices Index registered 84.6 percent, down 2.5 percentage points compared to the March figure of 87.1 percent. The Backlog of Orders Index registered 56 percent, 4 percentage points lower than the March reading of 60 percent. The Employment Index figure of 50.9 percent is 5.4 percentage points lower than the 56.3 percent recorded in March. The Supplier Deliveries Index registered 67.2 percent, an increase of 1.8 percentage points compared to the March figure of 65.4 percent. The Inventories Index registered 51.6 percent, 3.9 percentage points lower than the March reading of 55.5 percent. The New Export Orders Index reading of 52.7 percent is down 0.5 percentage point compared to March's figure of 53.2 percent. The Imports Index registered 51.4 percent, a 0.4-percentage point decrease from the March reading of 51.8 percent." See report

Here is the table of PMI components.

The chart below shows the Manufacturing Composite series, which stretches back to 1948. The eleven recessions during this time frame are indicated along with the index value the month before the recession starts.

For a diffusion index, the latest reading is 55.4 and indicates expansion. What sort of correlation does that have with the months before the start of recessions? Check out the red dots in the chart above.

Here is a closer look at the series beginning at the turn of the century.

Note: This commentary used the FRED USRECP series (Peak through the Period preceding the Trough) to highlight the recessions in the charts above. For example, the NBER dates the last cycle peak as December 2007, the trough as June 2009 and the duration as 18 months. The USRECP series thus flags December 2007 as the start of the recession and May 2009 as the last month of the recession, giving us the 18-month duration. The dot for the last recession in the charts above is thus for November 2007. The "Peak through the Period preceding the Trough" series is the one FRED uses in its monthly charts, as illustrated here.

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Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.