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Home > Economics > ISM manufacturing survey points toward further moderation

ISM manufacturing survey points toward further moderation

May. 1, 2019 by Joseph Brusuelas

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Those looking for stabilization in the downward trajectory of U.S. manufacturing sentiment will have to wait until mid-year.

The April 2019 Institute for Supply Management Report on Business – an important gauge of U.S. factories – arrived below expectations with the top line index slowing to 52.8 from 55.3, the weakest level since late 2016.

Forward-looking new orders index eased to 51.7 from 57.4 a month earlier. The employment sub-indices slowed to 52.4 from 57.5 in March, which would imply another month of disappointing hiring in manufacturing ahead of Friday’s BLS estimate of the April hiring.

Global headwinds and a modest pace of consumption have combined to slow the minor inventory imbalance in the manufacturing ecosystem.

The comments section of the ISM survey clearly indicated problems inside the North American supply chain linked to policy on trade and immigration along the southern U.S. border. This, along with a modest inventory imbalance, will continue to damp overall manufacturing and industrial production.

Global headwinds and a modest pace of consumption have combined to slow the minor inventory imbalance in the manufacturing ecosystem.

Backlogs increased to 53.9 from 50.4, and inventories increased to 52.9 from 51.8, both of which point to a difficulties in procuring goods used at earlier stages of production, intermediate goods and sufficient demand to clear inventories. One of the most under-discussed issues in manufacturing is the build-up of autos in showrooms around the country. The U.S. consumer will need to step up activity to clear the inventory imbalance in the auto industry, and this is the most probable explanation of the sentiment data around inventory to sales ratios in the industrial ecosystem.

Prices paid eased to 50 from 54.3, which is consistent with moderation in an array of inflation indices.

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Filed Under: Economics, Industrials Tagged With: manufacturing

About Joseph Brusuelas

@JoeBrusuelas

Joe Brusuelas, “chief economist to the middle market,” is the preeminent voice championing issues and policies facing midsize companies in the United States and around the world. An award-winning economist, Brusuelas has more than 20 years’ experience analyzing U.S. monetary policy, labor markets, fiscal policy, international finance, economic indicators and the condition of the U.S. consumer.

A member of the Wall Street Journal’s forecasting panel, Brusuelas regularly briefs members of Congress and other senior officials regarding the impacts of federal policy on the middle market and the factors by which middle market executives make business decisions. He also frequently offers his insights on the U.S., Canadian and global economies in the financial media. In 2020, he was named one of the 100 most influential economists by Richtopia.

Before joining RSM in 2014, Brusuelas spent four years as a senior economist at Bloomberg L.P. and the Bloomberg Briefs newsletter group, where he co-founded the award-winning Bloomberg Economic Brief. Earlier in his career, he was a director at Moody's Analytics covering the U.S. and global economies for the Dismal Scientist website. He also served as chief economist at Merk Investments L.L.C. and chief U.S. economist at IDEAglobal.

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