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First Cut: April ISM Manufacturing Index declines on impacts of trade and tariff policy

The ISM Manufacturing Index fell to 52.8 in April from 55.3 in March to a mild pace of growth not seen since the fall of 2016. The manufacturing sector registered a 32nd consecutive month of growth, but it has seen significant moderation in its pace since the end of 2018. Survey respondents’ comments suggest that much of the blame may be placed on trade and tariff policies that have added to uncertainties for costs and supply chains. Expansion continues if only mildly. Survey respondents also indicated that the outlook for later this year is still for growth. The present lower reading may not be concerning unless it persists into the next couple of months.

The downbeat reading for the index was due to a sharp decline in new orders (51.7 in April after 57.4) in March, an easing production (52.3 after 55.8), and slower hiring (52.4 after 57.5). Inventories were up a bit (52.9 after 51.8) but on trend with recent months. Delivery times were little changed (54.6 after 54.2) and also on the recent trend.

The index of prices paid is right around the neutral mark at 50.0 and seeing very little overall upward pressure on prices. There hasn’t been much change in the last five months.

The index for export orders has been on the soft side since October 2018 and April fell just below neutral at 49.5 after 51.7 in March. It hasn’t seen contraction since early 2016. Imports were also below the 50-mark for the first time since early 2017 and fell to 49.8 in April after 51.1 in March.

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