–ISM Manufacturing Index at 48.7 vs. 49.0 in March, Above Consensus (47.9)
–ISM’s Fiore: Tariff Concerns Account for 82% of April Survey Comments vs. 67% in March, Overshadowing Any Kind of Demand Comment
–Fiore: Don’t Think US in Recession but PMI Indicates Moving in That Direction
–Fiore: Not a Tariff Fan; Firms Won’t Invest, US Consumers Will Pay for Higher Costs, Not Good for Economy
By Max Sato
(MaceNews) – U.S. manufacturing activity was in contraction for the second straight month in April after a brief growth period at the start of the year as stiff tariffs on imports began to choke demand, prompting firms to slash output and shed workers more urgently, also against the backdrop of elevated costs.
The data released Thursday by the Institute for Supply Management showed that the ISM manufacturing sector purchasing managers’ index dipped 0.3 percentage point to 48.7 in April after slumping 1.3 points to 49.0 in March. It was still above the median economist forecast of 47.9. The PMI was in slight expansion at 50.3 in February and 50.9 in January, the first time the index had popped above the neutral line of 50 since October 2022 (50.3).
“Demand and production retreated and destaffing continued, as panelists’ companies responded to an unknown economic environment,” Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement.
“Prices growth accelerated slightly due to tariffs, causing new order placement backlogs, supplier delivery slowdowns and manufacturing inventory growth.”
New orders from both domestic and overseas customers are down due to uncertainty over near-term demand as well as conflicts about who will pay for the extra costs generated by the tariffs on imports from around the world, Fiore told reporters.
“This month the biggest issue on panelists’ mind is the effects of tariffs on supply management and cost structures: Tariff concerns amount to 82% of the headline comments, which is up from 67% in March, strongly overshadowing any kind of demand comment,” he said. “The manufacturing economy is struggling with tariff uncertainty.”
Fiore sounded more cautious about the outlook, compared to his prediction made last month that things could clear up eventually as the new tariffs were expected to have only “a one-time hit.” The on-and-off imposition of tariffs is “exhausting” supply mangers who seem to be spending four to five months trying to figure out the most likely scenarios of from where they should source materials and products, he said.
“They are frozen here, waiting for direction,” Fiore said. “Even if we see some direction, somehow people will have to be convinced that will be the direction. I don’t think any of this happening until the second half of this year.”
“I don’t think we are in recession,” he said but quickly added that the ISM manufacturing PMI indicates the economy is moving in that direction.
Seeing the production index plunge by 4.3 points to 44.0 in April, the lowest since 34.2 in May 2020, Fiore said, “We are headed in the wrong direction and I don’t see any relief in the near term.” The low output number entails low revenues, which in turn will force firms to release more workers, he added.
Fiore expects to see production index remain low in May while input costs for manufacturers, as measured by the prices paid index, are set to rise further as the continued rise in the prices index to 69.8 in April from 69.4 in March (the highest since 78.5 in June 2022 when the impact of the Russian invasion of Ukraine was lingering) reflects mostly higher costs for importing steel and aluminum and more price hikes are coming under the new tariff regime.
“That’s what we are dealing with here and that prices number 70, I don’t believe that’s a good reflection of big beautiful tariffs on everything,” he said. “We could easily see that number go to 70 or 80.”
The Trump tariffs are posing a more serious threat to supply management in the form of an “artificial constraint,” compared to the delivery delay caused by a sharp rebound in demand from the initial lockdown of global economies during the pandemic, Fiore said.
“I think that (the pandemic era supply chain breakdown) was probably easier because that was just a physical movement of containers from a ship to a dock to a truck to a delivery location.” This time, customs clearance under additional import duties on almost all cargoes requires more staff and financial transactions, causing confusion and a huge load on customs brokers and making the procedures more complicated for smaller firms that lack infrastructure, Fiore said.
“It’s causing strains,” he said. “The delivery number is still high (slow deliveries) in the absence of demand. That’s a reflection of slowdown in clearing containers out of ports. We saw some indications of transportation disruption around the ports.”
“I’m not a tariff fan,” Fiore said, noting that companies are not investing in new capacity and U.S. consumers will pay for the higher costs in the end, which is “not good for the economy.”
Initially, President Trump slapped 25% tariffs on Canadian and Mexican imports to the U.S. and an additional 10% on China over illegal immigration and drug trafficking for which he blames those countries. He has jacked up the duties on imports from China to a massive 145% while announcing a minimum 10% tariff on all U.S. imports. Trump has also imposed a 25% tariff on all imported autos and auto parts but he is considering measures to help ease the strain on the domestic auto industry.
Among the five subindexes that directly factor into the manufacturing PMI, the new orders index: 47.2 vs 45.2 in March. It contracted in April for the third consecutive month after three consecutive months of expansion. The latest reading is below the 12-month moving average (48.5). The index hasn’t indicated consistent growth since a 24-month streak of expansion that ended in May 2022.
The production index: 44.0 vs. 48.3. Prior to the first two months of 2025, the last time the index registered above 50 was in April 2024 (50.7).
The employment index: 46.5 vs. 44.7. It ticked up but remained in contraction as firms continued to release workers. “Companies generally opted for layoffs because they are quicker to implement than attrition,” Fiore noted.
The supplier deliveries index (the only one that is inversed): 55.2 vs. 53.5. Delivery performance of suppliers to manufacturers was slower for a fifth straight month. It follows a contraction (which indicates faster delivery) in November 2024, preceded by four consecutive months of slower deliveries. After a reading of 52.4 in September 2022, the index went into contraction and remained there for 20 out of 21 months, with February 2024 the exception.
The manufacturing inventories index: 50.8 vs.53.4. Although the index gave back 2.6 points of the 7.5 points it gained in February and March, the last two readings have been the index’s highest since December 2022 (51.4). Prior to March 2025, the last time the index was above 50 was in August 2024 (50.2). “Inventory growth is not a positive sign when demand is moving in the opposite direction; the recent expansion is considered a temporary move to avoid tariffs, and levels will decline when such trade issues are resolved,” Fiore said, without providing any timeframe as to when the global trade war could end.
Among other subindexes, the prices paid index: 69.8 vs. 69.4 in March. It remains the highest since 78.5 recorded in June 2022, when price pressures were easing month by month. The latest reading indicates raw materials prices increased for the seventh straight month after a decrease in September.
The new export index: 43.1 vs. 49.6, hitting the lowest since 39.5 in May 2020, when it began to pick up from the pandemic-triggered record low of 35.3 in April 2020. It contracted for the second month in a row in April after expanding for two consecutive months. The 6.5-point decrease is the largest since April 2020, when the index dropped 11.3 points.