U.S. Manufacturing Industry Slows Sharply in April

The US Manufacturing activity in contracted in April at the fastest pace in five months, driven by a sharp drop in orders. According to the Institute for Supply Management (ISM), the manufacturing index fell by 0.3 points to 48.7. The production sub-index plunged more than 4 points to 44, its lowest level since the start of the pandemic.

Orders Fall and Backlogs Worsen

New orders declined for the third consecutive month, while backlogs continued to deteriorate. This trend reflects persistently weak demand. Overall, six industrial sectors reported contractions, while eleven showed growth, led by apparel, petroleum, plastics, and rubber.

Input Costs Rise Again

Despite falling energy prices, the index for prices paid for materials reached its highest level since June 2022. Rising tariffs also contributed to the increase in costs, causing order delays, supplier delivery slowdowns, and inventory buildups.

Front-Loading Imports Loses Momentum

The strategy of front-loading imports to avoid tariffs is losing relevance. ISM’s imports index experienced its largest drop since late 2023, indicating a shift in manufacturers’ sourcing strategies.

How Trump’s Recent Tariffs Will Be Applied to Automotive Parts?

After sustained lobbying from the automotive sector, President Trump has amended his aggressive auto tariff plan…

Manufacturing Employment Falls for Third Month

The decline in orders and production has also impacted employment. For the third consecutive month, the manufacturing sector reported job losses. Government data expected on Friday is likely to confirm the first monthly drop in factory jobs in three months.

Inventories Remain Tightly Managed

Despite economic uncertainty, manufacturers are avoiding overstocking. The ISM inventory index fell to 50.8, showing companies are tightly controlling their stock levels.

Outlook Dims Amid Uncertainty

“Demand and production declined, and staffing reductions continued as companies face an uncertain economic outlook,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee. The manufacturing sector now faces a challenging environment marked by rising costs, shifting trade policies, and stagnant demand.