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ISM: Manufacturing sector contracted in April

Written by Brett Linton

US manufacturing activity contracted in April, according to the latest report from the Institute for Supply Management (ISM). The index had briefly showed expansion in March, but has indicated a contracting manufacturing sector for 17 of the last 18 months.

The ISM Manufacturing PMI fell to 49.2% in April, down 1.1 percentage points from March’s 18-month high. A reading above 50 indicates the manufacturing economy is growing, while a reading below 50 indicates contraction.

However, ISM said the overall economy expanded for the 48th straight month in April after one month of contraction in April 2020. The institute noted that a Manufacturing PMI above 42.5%, over a period of time, usually indicates the overall economy is expanding.

“Demand remains at the early stages of recovery, with continuing signs of improving conditions,” ISM chair Timothy R. Fiore said in a statement. “Production execution continued to expand in March, but at a slower rate of growth than in prior months. Suppliers continue to have capacity but work to improve lead times, due to their raw material supply chain disruptions.”

Of the 16 manufacturing industries tracked, ISM said nine reported growth in April while seven reported contraction. Fabricated metal products was identified as an industry in contraction.

Steel market comments

The report includes comments from survey respondents. A fabricated metal products executive expressed easing business conditions, commenting, “Business is slowing down — it has been a gradual decline for the last several months. We are not seeing new orders at last year’s level, or at this year’s budgeted levels.”

Another primary metals respondent reported steady conditions, remarking, “Business is stable, and orders have been consistent. We’re quoting new business for the factory, and automotive builds continue at averages but not near maximum outputs. Workforce is stable, with the turnover ratio dropping considerably. Salaries and hourly rates increasing to meet inflationary pressures.”

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