The first of this week’s top-tier US data disappointed.
Traders and investors are on high alert for evidence to support sundry recession narratives, and while Monday’s update on US factory activity didn’t point to an imminent downturn, it did print near the low-end of the forecast range.
At 55.4 (figure on the left, below), ISM manufacturing missed estimates badly. Consensus expected 57.6. The range of estimates, from nearly six-dozen economists, was 55 to 59.
The final read on S&P Global’s gauge for April was 59.2, down from 59.7 on the flash print.
The headline ISM print was the lowest since July of 2020. “In April, progress slowed in solving labor shortage problems at all tiers of the supply chain,” Timothy Fiore said, noting that panelists saw higher quit rates, with fewer indicating progress in filling open positions.
The employment gauge dropped sharply, and at 50.9, sits one point above contraction territory. Labor constraints appear to have affected deliveries, which slowed at a faster rate compared to March. The report also nodded to ongoing logistical problems. “Transportation networks are again demonstrating less flexibility,” ISM said.
New orders ticked lower, inventory expansion slowed and prices paid dropped, albeit to a still-elevated 84.6. Backlogs fell to 56 from 60.
Chris Williamson, Chief Business Economist at S&P Global, painted a different picture. “After a slow start to the year, which saw production growth almost stall, the manufacturing sector is starting the second quarter on a much stronger footing,” he said, in the color accompanying the final installment of last month’s survey. Williamson called demand “encouragingly robust” but described inflation pressures as “severe.”
I won’t attempt to reconcile the surveys, but suffice to say the ISM miss will perpetuate growth concerns and, for some, validate the “apples to oranges” comparison illustrated in the figure on the right (above).
