ISM Manufacturing Report Shows Continued Growth

May 1, 2012
U.S. manufacturing registers 33rd month of consecutive expansion.

U.S. manufacturing grew at a better than expected rate in April, reaching 54.8 on the Purchasing Manager Index (PMI) issued by the Institute for Supply Management. The index was up 1.4% from the March figure of 53.4. Analysts had expected the index to fall to 53.0.

Manufacturing has been "one of the most reliable sources of growth in the U.S. economy since the Great Recession ended," said economist Alistair Bentley with TD Economics.

Sixteen of the 18 manufacturing sectors tracked in the report grew in April, with only wood products contracting.

New orders (58.2 from 54.5), production (61.0 from 58.3) and employment (57.3 from 56.1) indexes all improved in April.

The ISM prices index held steady at 61% in April, the same rate as March. In April, 33% of respondents reported paying higher prices, 11% reported paying lower prices and 56% reported paying the same prices as in March.

Bentley said price pressures on manufacturing "appear to have reached a near-term peak, as energy and commodity prices stabilize" following their increases earlier this year.

Manufacturing activity has become increasingly dependent on U.S. consumer spending (and autos in particular) over the past six to nine months, Bentley pointed out. The sagging European economy has hurt export-based producers, while a sharp slowdown in domestic business investment has weighed on capital equipment manufacturers. He noted that the index for new export orders did rise in April from 54.0 to 59.0, indicating a possible shift in the export trend.

The manufacturing PMI indicated continued growth in the overall U.S. economy. "The past relationship between the PMI and the overall economy indicates that the average PMI for January through April (53.7%) corresponds to a 3.8% increase in real gross domestic product (GDP)," said Bradley J. Holcomb, chair of ISM's Manufacturing Business Survey Committee. "In addition, if the PMI for April (54.8%) is annualized, it corresponds to a 4.1% increase in real GDP annually."

Daniel J. Meckstroth, chief economist for the Manufacturers Alliance for Productivity and Innovation, said that despite weak overall economic growth, consumers have a need to replace durable goods. "MAPI believes there is consumer pent-up demand, particularly for motor vehicles. Firms are very profitable and have the resources and the need to invest in replacement and now capacity-expanding equipment," he said.

Furthermore Meckstroth concluded, the construction cycle is turning positive and U.S. exports of manufactured goods are globally competitive. Manufacturing is in the sweet spot of current demand; the sector, however, cannot continue its outsized growth rate and is expected to continue expanding, but at a slower pace for the remainder of the year.

Popular Sponsored Recommendations

Ecommerce Guide: How to Manage Order Volume Spikes

Oct. 2, 2023
Master the art of delivering a seamless ecommerce shopping experience! Learn how to streamline your operations to successfully manage seasonal sales order spikes.

How Manufacturers Can Optimize Operations with Weather Intelligence

Nov. 2, 2023
The bad news? Severe weather has emerged as one of the biggest threats to continuity and safety in manufacturing. The good news? The intelligence solutions that build weather ...

Goodridge Boosts Productivity & Saves Costs by Moving to the Cloud!

Dec. 4, 2023
With Infor's cloud solutions, Goodridge has been able to greatly increase overall productivity, cost savings, data visibility, and automation. This case study discusses the many...

Shifting Your Business from Products to Service-Based Business Models: Generating Predictable Revenues

Oct. 27, 2023
Executive summary on a recent IndustryWeek-hosted webinar sponsored by SAP

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!