Friday, May 01, 2009

ISM Manufacturing Shows Contraction in April

by Bill McBride on 5/01/2009 09:59:00 AM

From the Institute for Supply Management: April 2009 Non-Manufacturing ISM Report On Business®

Economic activity in the manufacturing sector failed to grow in April for the 15th consecutive month, and the overall economy contracted for the seventh consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.
Manufacturing contracted in April as the PMI registered 40.1 percent, which is 3.8 percentage points higher than the 36.3 percent reported in March. This is the 15th consecutive month of contraction in the manufacturing sector. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
"The decline in the manufacturing sector continues to moderate. After six consecutive months below the 40-percent mark, the PMI, driven by the New Orders Index at 47.2 percent, shows a significant improvement. While this is a big step forward, there is still a large gap that must be closed before manufacturing begins to grow once again. The Customers' Inventories Index indicates that channels are paring inventories to acceptable levels after reporting inventories as 'too high' for eight consecutive months. The prices manufacturers pay for their goods and services continue to decline; however, copper prices have bottomed and are now starting to rise. This is definitely a good start for the second quarter."
emphasis added
As noted, any reading below 50 shows contraction, although the pace of contraction has slowed.

In other news, new manufacturer orders were down, from the Census Bureau:
New orders for manufactured goods in March, down seven of the last eight months, decreased $3.2 billion or 0.9 percent to $345.3 billion, the U.S. Census Bureau reported today.