–ISM: Manufacturing Sector at Pause as Buyers Wait for Prices to Come Down
–ISM: Supply Constraints Not Getting Worse; ‘Very Concerned’ Over China Port Situation
–ISM: No Indication of Softening Demand in US Despite Q1 GDP Contraction
By Max Sato
The US manufacturing sector index compiled by the ISM unexpectedly slumped to 55.4 in April from 57.1 in March, hitting the lowest level since September and August 2020, when it was also at 55.4. Last time the index was below that level was 53.9 in July 2020. The main index stayed above the breakeven point of 50, indicating that the overall economy expanded for the 23rd consecutive month.
The new orders index dipped 0.3 point to 53.5 in April from 53.8 in March and 61.7 in February, staying at the lowest level since 32.2 in May 2020. The employment index plunged 5.4 points to 50.9 in April, matching the same level in September 2021. It followed a 3.4-point rise to a one-year high of 56.3 in March.
“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment,” Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement, repeating the summary from the previous month.
For the latest month, he noted that progress slowed in solving labor shortage problems at all tiers of the supply chain. “Panelists reported higher rates of quits compared to previous months, with fewer panelists reporting improvement in meeting head-count targets,” he said.
Asked about the possibility of the US economy falling into recession, Fiore told reporters that the first quarter GDP contraction was caused by a surge in imports and that “there is no indication of softening of demand.”
Amid a resurgence in Covid cases in some countries, the new export orders index fell further to 52.7 in April from 53.2 in March and 57.1 in February. It was the lowest since 50.4 seen in July 2020.
The prices index eased 2.5 points to 84.6 in April after surging 11.5 points to 87.1 in March from 75.6 percent in February. Buyers are waiting for prices to come down, Fiore said. “We are kind of at a pause at this point,” he said.
The supplier deliveries index jumped 1.8 points to 67.2 in April after falling 0.7 point to 65.4 in March, indicating longer delays on the month.
Supply chain constraints are “not getting worse,” Fiore said, but added that he is “very concerned about the port situation,” which has slipped back to the tight conditions seen last fall.
“If it wasn’t for Covid in Asia, I would be more optimistic,” he said. Fifteen percent of panelists’ general comments expressed concern about their Asian partners’ ability to deliver reliably in the summer months, up from 5% in March, he explained.
“Tier-2 supplier shutdowns in Shanghai are causing a ripple effect for our suppliers in other parts of China,” a firm producing chemical products told the ISM survey. “Long delays at ports, including in the U.S., are still providing supply challenges.” It also said inflation is “out of control” as fuel costs, and therefore freight costs, are leading the upward cycle.
A company in the food, beverage and tobacco products sector said: “Supply chain is still constrained, and prices continue to rise. We are focusing on ways to stay profitable while continuing to fill customer orders.”
The production index fell by 0.9 point to 53.6 in April after falling to 54.5 in March from 58.5 in February. It remained at the lowest level since 34.0 in May 2020.
The backlog orders Index fell 4.0 points to 56.0 in April from 60.0 in March. The Inventories Index dipped 3.9 points to 51.6 from 55.5.