The manufacturing sector continues to expand, albeit at a slower pace, while hiring has picked up speed, says the latest Manufacturing Report on Business by the Institute for Supply Management:

The manufacturing sector added jobs at a faster rate last month, says the nation’s supply executives in the latest Manufacturing ISM Report On Business®. The report, which is issued by the Institute for Supply Management (ISM), gives an early indication of the status of the manufacturing sector. Signifying manufacturing job gains, the report’s employment index increased for the sixth straight month, to a reading of 57.8% from 57.0% in March. It is still at its highest level since December 1987.

According to April figures, economic activity in the manufacturing sector grew for the 11th consecutive month, while the overall economy expanded for the 30th month in a row. Based on a survey of purchasing managers, an index above 50 indicates expansion within the manufacturing sector while a reading below 50 signifies contraction over the prior month. An index at 50 means that there was an equal balance between manufacturers reporting gains and declines in their business.

The April manufacturing index of 62.4% was a slight decrease from March’s 62.5% and fell below economists’ expectations of a 63.0 reading. Still, it represents healthy growth for the sector. Moreover, it marked the sixth consecutive month that the manufacturing index has exceeded 60%. “The index was strong in March. It is still strong in April,” Chris Low, chief economist at FTN Financial in New York, tells USA Today. “That suggests we have not lost any momentum in the economy.”

Norbert J. Ore, C.P.M., who manages the index for the ISM and is also group director of strategic sourcing and procurement at Georgia-Pacific Corporation, released the report last week. “The manufacturing sector continued to improve in April,” he says. “While new orders contracted slightly compared to last month, production moved upward, and employment grew at a faster rate.”

Meanwhile, manufacturers once again experienced higher prices in their purchases, according to ISM’s prices index. In fact, the April index of 88.0%—an increase of 2 percentage points from March’s 86.0%—was the highest reading since November 1979. “The list of metals up in price is quite extensive—almost every category of product has seen price movement,” says Ore.

Comments from survey respondents reflect the continuing improvement of the manufacturing sector. However, there are still a number of companies in various industries that have yet to benefit from the recovery. Persistent themes are concerns about the availability of ferrous and non-ferrous metals, and escalating costs in a market that is still resistant to higher consumer prices.

ISM’s new orders index declined 0.7 percentage point from 65.7% in March to 65% in April. ISM’s production index increased 1.5 percentage points from 65.5% in March to 67% in April.

ISM’s supplier deliveries index registered 67.1%, 0.8 percentage point lower than March’s 67.9%. The inventories index stood at 44.8% in April, down from the 48.3% reported in March. ISM’s customers’ inventories index for April is at 40.5%, an increase of 1 percentage point compared to the March reading of 39.5%.

ISM’s backlog of orders index indicates that order backlogs increased in April. It rose 3 percentage points, hitting 66.5% in April. The new export orders and import indexes are also growing, with imports accelerating at a faster rate in April. While ISM’s new export orders index registered 61%, a decrease of 1 percentage point from March’s 62%, ISM’s imports index increased 1.7 percentage points to 58.5% in April.

“The second quarter is off to a very strong start,” says Ore. “Many respondents indicate that order backlogs are growing for the first time in several years.”

All responding industries reported growth: apparel; paper; furniture; industrial and commercial equipment and computers; transportation and equipment; primary metals; instruments and photographic equipment; textiles; glass, stone and aggregate; petroleum; miscellaneous*; electronic components and equipment; wood and wood products; rubber and plastic products; chemicals; tobacco; fabricated metals; printing and publishing; and food.

To learn how you might respond to this survey and contribute to this monthly report on the state of the manufacturing sector, please visit the ISM Report or contact Kristin Bryson at ISM (kbryson@ism.ws).

For more information on the latest Manufacturing ISM Report On Business, go to www.ism.ws/ISMReport.

*Miscellaneous is a preponderance of jewelry, toys, sporting goods and musical instruments.

Sources:

April Manufacturing ISM Report On Business
Institute for Supply Management
www.ism.ws/ISMReport

Manufacturing Growth Slows in April, But Jobs Improve
USA Today, May 3, 2004
www.usatoday.com/money/economy/production/2004-05-03-ism-construction_x.htm