Input Stories

In April, the U.S. manufacturing sector contracted for the second consecutive month and at a slightly faster pace than the prior month, with the ISM Manufacturing^® PMI decreasing to 48.7% from 49.0% in March. Customer demand and output weakened, while input strengthened further, which are not seen as positive conditions for economic growth. The New Orders and Employment Indexes continued to contract but at a slower pace, rising to 47.2% and 46.5%, respectively. Production contracted at a faster pace, weakening to 44.0%, 4.3 percentage points lower than March. Meanwhile, inventories (50.8%) grew at a slower pace in April, which is not a positive sign amid slowing demand.

The New Orders Index contracted for the third consecutive month but at a slower pace than the prior month, a 2.0 percentage point rise from March. The index hasn’t shown consistent growth since a 24-month streak of expansion ended in May 2022. Of the six largest manufacturing sectors, four—petroleum and coal products; machinery; computer and electronic products; and chemical products—reported an increase in new orders. The percentage of respondents noting “higher” and “lower” new orders both rose in April, an unusual sign and indication of a period of transition.

The New Export Orders Index contracted for a second consecutive month and at a faster pace since the pandemic to 43.1%, 6.5 percentage points lower than March. The sharp contraction was due to the combination of slower global growth as well as the application of retaliatory tariffs applied to a variety of U.S.-manufactured products. Meanwhile, the Imports Index contracted after three consecutive months of expansion, dropping 3.0 percentage points to 47.1% in April. Unlike in prior months, buyers were no longer pulling forward deliveries as increased tariff rates went into effect, and lower demand reduced the need to maintain the import levels of prior months.

The Employment Index contracted for the third consecutive month but at a slower pace than the prior month, a 1.8 percentage point bump from March. Of the six-largest manufacturing sectors, three—petroleum and coal products; transportation equipment; and computer and electronic products—reported increased employment. Companies continued to reduce headcounts through layoffs, attrition and hiring freezes.

The Prices Index rose 0.4 percentage points to 69.8%, indicating raw materials prices increased for the seventh straight month in April to its highest reading since June 2022, driven by the dramatic rise in steel and aluminum prices, as well as the broad 10% tariff applied to imported goods. Forty-nine percent of companies reported paying higher prices, up dramatically from 21% in January.