Manufacturing activity declines in April
by May 1, 2023 12:29 pm 642 views
Economic activity in the manufacturing sector contracted in April, but the activity improved narrowly from March to April, according to the Institute for Supply Management (ISM). Still, April was the sixth consecutive monthly decline in the activity.
The ISM on Monday (May 1) released the newest Manufacturing ISM Report on Business, which shows the purchasing managers’ index (PMI) increased by 0.8 percentage points to 47.1% in April from March. A PMI below 50% indicates manufacturing sector activity is declining.
According to the April report, new orders and production fell. Backlogs decreased. Supplier deliveries rose. Raw materials inventories decreased, while customers’ inventories remained too high. Prices increased. And exports and imports declined.
“The U.S. manufacturing sector contracted again; however, the Manufacturing PMI improved compared to the previous month, indicating slower contraction,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee. “The April composite index reading reflects companies continuing to manage outputs to better match demand for the first half of 2023 and prepare for growth in the late summer/early fall period.”
The report showed panelists were mixed on whether to increase or decrease staffing levels amid uncertainty as to when growth will return.
“New order rates remain sluggish as panelists remain concerned about when manufacturing growth will resume,” Fiore said. “Panelists’ comments registered a 1-to-1 ratio regarding optimism for future growth and continuing near-term demand declines. Supply chains are prepared and eager for growth, as panelists’ comments support reduced lead times for their more important purchases. Price instability remains, and future demand is uncertain as companies continue to work down overdue deliveries and backlogs. Seventy-three percent of manufacturing (GDP) is contracting, up from 70% in March. However, fewer industries contracted strongly; the proportion of manufacturing GDP with a composite PMI calculation at or below 45% — a good barometer of overall manufacturing weakness — was 12% in April. Compared to 25% in March.”
The following five industries reported growth in April: printing and related support activities; apparel, leather, and allied products; petroleum and coal products; fabricated metal products; and transportation equipment.
RESPONDENT COMMENTS
In the transportation equipment industry, a respondent said, “business is steady. Closely monitoring demand going forward to detect a negative trend.”
A respondent in the fabricated metal products industry noted “faster deliveries and shorter lead times from suppliers. Customers starting to talk build rate reductions for the second half of 2023.
A respondent in the computer and electronic products industry also noted a decrease in lead times, “although electronic components are still a concern.” The respondent also is “looking to reset with a number of our suppliers to reduce inventory.”
A respondent in the food, beverage and tobacco products industry highlighted challenges with pricing pressures. “After consecutive years of inflation and aggressive pricing to our retailers, we are starting to see resistance in the willingness to pass along pricing to end consumers,” the respondent said. “Discounting has entered into conversations.”
In the chemical products industry, a respondent said, “staffing levels in our sector are not decreasing, but employment openings are slowing across the economy, which reduces the pool of replacement candidates. We are currently projecting that the third quarter will see some improvement in business, especially in our metals coating for the aerospace industry. But unforeseen circumstances – international or domestic – could change things quickly.”
Other respondents reported mixed demand amid uncertainty. In the primary metals industry, a respondent said, “we seem to be in a season of contradictions. Business is slowing, but in some ways it isn’t. Prices for some commodities are stabilizing but not for others. Some product shortages are over; others aren’t. Trucking is more plentiful, except when it isn’t. There’s uncertainty one day but not the next. The next couple of months should provide answers – or not. It’s hard to make projections at the moment.”