ISM Manufacturing Index
ISM Manufacturing Index: The Institute for Supply Management’s manufacturing index moved up 0.8% (m/m) to 47.1 for April 2023; this value is weaker than the forecast of 50. The new orders sub-index scored at 45.7. The latest reading suggested economic activity in the manufacturing sector shrank for a sixth consecutive month, as higher borrowing costs and tight credit hit activity and boosted the risk of a recession this year.
The ISM manufacturing index is based on surveys of 300 purchasing managers in 17 industries. The survey is a diffusion index calculated as a percent of responses. A value of 50 is neutral, while less than 50 denotes contracting manufacturing activity and greater than 50 denotes expanding activity.
Figure 1 breaks down the composite index and sub-indexes. The backlogs sub-index was 43.1 this month, while the inventories sub-index was 46.3.
The five manufacturing industries that reported growth in April are: Printing & Related Support Activities; Apparel, Leather & Allied Products; Petroleum & Coal Products; Fabricated Metal Products; and Transportation Equipment. The 11 industries reporting contraction in April, in the following order, are: Furniture & Related Products; Wood Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Chemical Products; Machinery; Primary Metals; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing.
“Customers seem to be quite heavy on inventory (as is my employer). This has made for a significant slowdown in sales orders for the last number of months.” [Machinery]
At Gerdau, we closely monitor the ISM manufacturing index since it is an excellent barometer of the present strength, as well as a window on the likely short-run future, of U.S. manufacturing.