By Orbex
The Institute of Supply Management (ISM) will be releasing April’s report for the manufacturing sector today. According to the median poll of economists, manufacturing activity is forecast to dip from March’s rebound.
In March, manufacturing activity rose to 55.3. The forecasts for April show that activity could ease to 55.0. This marks a 0.3 point decline from the month before. Despite the decline, activity for March is forecast to remain in expansionary mode.
The data will be closely watched as it marks the first month for the second quarter of the year. In the first three months of the year, manufacturing activity grew on average 55.0.
Therefore, the April data falls in line with the average pace of growth in the sector from the first quarter. But this would be somewhat slower comparing to the fourth quarter of last year. In the final three months of 2018, manufacturing activity was averaging around 58.6.
Interestingly though, despite a slower pace of increase, the first quarter GDP rebounded to 3.2%, comparing to a 2.2% increase in the fourth quarter of last year.
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The ISM’s manufacturing activity hit a peak of 60.8 in September last year and since then it has been easing steadily over the months.
The manufacturing activity as measured by the Institute of Supply Management recovered in March. Official data showed that manufacturing activity rose to 55.3 in March, following a drop to 54.2 in February.
February’s declines were recorded to be a two-year low in the index. The data for March beat estimates of an increase to 54.6 for the period. Manufacturing activity for March saw the index for new orders rising 1.9 points to 57.4. The production index rose by one point to 55.8. The employment index jumped 5.2 points in March to 57.5.
The data for March brought some cheer as manufacturing activity was in a moderate decline during the previous months. Activity in the sector was trending lower since last September. As a result, the rebound in March’s activity brought some respite to a sector that was trending lower.
The report from the March ISM survey showed that 16 out of 18 manufacturing industries reported growth during the month. One of the main takeaways from the March report was that there were widespread skilled labor shortages.
There is a small chance that the actual PMI data for April will beat the estimates of 55.0. Various regional indicators show that activity was mixed.
Another measure of the manufacturing activity from Markit saw the preliminary results to be somewhat weaker. According to IHS Markit, manufacturing activity in the United States fell to 52.4 in April.
In the previous month, Markit’s measure of manufacturing was at 52.4. This was a weaker reading in the index comparing to the previous month of February.
With the regional index outlook showing mixed, the prospects of a beat on the estimates remain low.However, given that the recent headwinds such as trade worries have eased, optimism could push the index higher.
Businesses are likely to see some increase in activity as they head into the warmer periods of the year. A pick up in inventory is likely while the employment index could most likely remain at the current levels. Businesses in the survey are likely to point out the continued shortage of skilled workers.
This could potentially see a modest increase in the backlog of orders. In March, inventories fell slightly by just over 1.5%. They could, however, rebound in April.
Overall, we see that the ISM manufacturing PMI could fall within expectations. A surprise pickup in activity could, however, keep investors excited.
By Orbex