April ISM Report: PMI at 62.4 percent; new orders, production, employment grow; metal availability, escalating costs still concerns

May 3, 2004

Tempe, Ariz., May 3 – Economic activity in the manufacturing sector grew in April for the 11th consecutive month, while the overall economy grew for the 30th consecutive month, said U.S. supply executives in the latest Manufacturing ISM Report on Business®. The April PMI is 62.4 percent, marking the sixth consecutive month of PMIs above 60 percent. On the downside, persistent themes are concerns for availability of ferrous and nonferrous metals and escalating costs.

Norbert J. Ore, C.P.M., the Institute for Supply Management™ (ISM) Manufacturing Business Survey Committee chairman and group director, strategic sourcing and procurement, Georgia-Pacific Corp., said, "The manufacturing sector continued to improve in April. While new orders contracted slightly compared to last month, production moved upward, and employment grew at a faster rate. The PMI now has been above 60 percent for six consecutive months."

IISM's backlog of orders index indicates that order backlogs increased in April. The employment index grew for the sixth consecutive month. The prices index indicates that manufacturers once again experienced higher prices in their purchases, and at the highest rate since November 1979. The new export orders and import indexes continue to grow, with imports accelerating at a faster rate in April.

Comments from survey respondents indicate that the manufacturing sector continues to improve. However, there still are a number of companies in various industries that have yet to benefit from the recovery. Persistent themes are concerns for availability of ferrous and nonferrous metals, and escalating costs in a market that still is resistant to higher consumer prices.

April's 62.4 percent is a decrease of 0.1 percentage points when compared to 62.5 percent in March. The new orders index declined 0.7 percentage point from 65.7 percent in March to 65 percent in April. The production index increased 1.5 percentage points from 65.5 percent in March to 67 percent in April. The employment index is at 57.8 percent for April, an increase of 0.8 percentage point when compared to the 57 percent reported in March.

ISM's supplier deliveries index registered 67.1 percent, 0.8 percentage point lower than March's 67.9 percent. The inventories index registered 44.8 percent in April, down from the 48.3 percent reported in March. The customer inventories index for April is at 40.5 percent, an increase of 1 percentage point compared to the March reading of 39.5 percent. The prices index is 88 precent, 2 percentage points higher than the 86 percent reported in March.

ISM's backlog of orders index increased 3 percentage points, registering 66.5 percent in April, compared to 63.5 percent in March. The new export orders index registered 61 percent, a decrease of 1 percentage point from March's 62 percent. The imports index increased 1.7 percentage points to 58.5 percent in April, up from 56.8 percent in March.

"The second quarter is off to a very strong start. Many respondents indicate that order backlogs are growing for the first time in several years. The list of metals up in price is quite extensive—almost every category of product has seen price movement," said Ore.

All responding industries reported growth, including industrial and commercial equipment; transportation and equipment; primary metals; and fabricated metals, which also were among the 17 industries reporting employment growth.

The employment index grew for the sixth consecutive month, following a 37-month trend of contraction. The index registered 57.8 percent in April compared to 57 percent in March. The last time the employment index registered higher than April's index was in December 1987, registering 59.1 percent. An employment index above 48 percent, over time, generally is consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

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