Manufacturing Expands Again In April

Both new orders and production showed marked improvement.

For the 66th consecutive month, economic activity in the manufacturing sector expanded in April according to the ISM's Report on Business. Manufacturing growth registered 54.7%, an increase of 3.8 percentage points when compared to March's reading of 50.9%.

A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

"Manufacturing activity increased in April as the PMI reflects accelerating growth for the month. New orders and production improved significantly as did employment. Manufacturers are now in their ninth month of inventory reduction, so supply chains are generally in balance. On the negative side, prices continue to rise at a rapid rate with metals and energy being the areas of greatest concern to buyers," said Norbert J. Ore of ISM.

The 11 industries reporting growth in April -- listed in order -- are: Wood Products; Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Machinery; Chemical Products; Transportation Equipment; Computer & Electronic Products; Plastics & Rubber Products; Fabricated Metal Products; and Furniture & Related Products.

The report was a positive signal amid uncertainty and weakness in the economy, said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI. At 54.7 the ISM index is the highest it has been since May 2006. Orders, production, and backlogs all made substantial improvement over the March levels. The first look at April 2007 business activity, coming only days after weak first quarter GDP growth was reported, should give forecasters confidence that the deceleration over the last six months was primarily housing-related and that the loss of home equity is not systemically causing a significant deceleration in overall consumer spending.

The New Orders Index surged to 58.5% in April. The index is 6.9 percentage points higher than the 51.6% reported in March. The Production Index registered 57.3% in April, 4.3 percentage points higher than the 53% reported in March.

Inventories registered 46.3% in April, a 1.2 percentage point decrease when compared to March's reading of 47.5%.

The Employment Index registered 53.1% in April, which is an increase of 4.4 percentage points when compared to March's reading of 48.7%.

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