A measure of U.S. manufacturing activity unexpectedly dropped in April to the lowest level since 2020 as growth in orders, production and employment softened.
The Institute for Supply Management’s gauge of factory activity fell to 55.4 last month from 57.1, according to data released Monday. Readings above 50 indicate expansion. The figure was weaker than all but one estimate in a Bloomberg survey of economists, which had a median projection of 57.6.
The latest data underscore the impact from lingering supply constraints, made worse by restrictive Covid-19 measures in China. Measures of both new orders and production dropped to their lowest levels since May 2020, though remained above the threshold that indicates growth.
Seventeen manufacturing industries reported growth in April, led by apparel, machinery and plastics.
The supplier deliveries gauge climbed to a five-month high, showing longer lead times as factories remain haunted by transportation bottlenecks and delays.
“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment,” Timothy Fiore, chair of ISM’s Manufacturing Business Survey Committee, said in a statement. “In April, progress slowed in solving labor shortage problems at all tiers of the supply chain.”
Average lead times for production materials lengthened in April to a record 100 days. Lead times for capital equipment grew to 173 days, matching the highest in data back to 1987, while for supplies used in maintenance, repairs and operations they rose to 49 days.
A measure of prices paid by manufacturers settled back somewhat but remains extremely elevated.
Meantime, the employment gauge fell to a seven-month-low of 50.9, suggesting a slower pace of hiring in April. The government’s monthly jobs report, out Friday, is projected to show manufacturers added more than 30,000 jobs last month.
The headline gauge suggests shifting consumer spending patterns. Data last week showed inflation-adjusted purchases rose in March, driven by outlays on services rather than goods.
Select ISM Industry comments
“Supply chain is still constrained, and prices continue to rise.” — Food, Beverage & Tobacco Products
“Long delays at ports, including in the U.S., are still providing supply challenges. Inflation is out of control...Despite the issues and poor outlook, business remains brisk.” — Chemical Products
“New order entries are still very strong. Unfortunately, logistics issues have (not) yet improved, so lead times remain extended.” — Machinery
“Due to electronic component supply chain issues, production output has been lower than normal. “ — Fabricated Metals
“Business is strong. Backlog continues to grow due to new orders and inconsistent supply chain conditions.” — Electrical Equipment & Appliances
“The shutdowns in China due to a new Covid-19 wave are causing supply concerns for late second quarter and early third quarter.” — Miscellaneous Manufacturing
“Overall, improvements in supply chain are occurring on larger scale items, but we see suppliers that sell us low-volume items struggling in some cases with getting feed stocks and raw materials they need. Freight continues to plague things as well.” — Nonmetallic Mineral Products
ISM’s data also pointed to a slight improvement in the mismatch between supply and demand. Backlog growth decelerated, and a gauge of customer inventories rose to its highest since December 2020, though remains historically low.
