Report On Business® Roundup: April Manufacturing PMI®
The Manufacturing ISM® Report On Business® on Thursday appeared to be well-received in the showroom that is the business and investor communities, but if any data screamed for a look under the hood, it was the PMI® reading for April.
Markets quickly moved on from the headline number of 48.7 percent, which actually beat analysts’ expectations. After all, it reflected only mild contraction in U.S. factory activity after the “Liberation Day” tariffs and the ensuring chaos, and the PMI® is down only 2.2 percentage points over the last four months. So, what’s the problem?
The issues are in the subindex data, which require critical examination for any ISM® Report On Business® release. And Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee, seemed to raise more red flags with every interview he gave on Thursday.
In a conference call with reporters, 10 minutes after the report’s release, he said, “Manufacturing is kind of wavering a bit. We’re on the edge of the cliff. Hopefully, we won’t go over, but the signs here are not positive.”
Later, on CNBC’s “Money Movers”: “This is an alarming report,” Fiore said, which elicited a “Wow” from co-host Sara Eisen. “We’re headed in the wrong direction, and I’m not actually sure how this is going to fix itself outside of some clarity in the tariff environment.”
Finally, on ISM’s LinkedIn Live broadcast: “There’s nothing positive about this report. But for people (watching), that’s why understanding what makes up the topline number is so important. (P)eople saw 48.7 percent and thought it was no big deal. But the five subindexes that (directly factor into the PMI®) and the other five that support the top five are signaling a lot of negativity.”
The five subindexes that calculate the Manufacturing PMI® are New Orders, Production, Employment, Supplier Deliveries and Inventories. Among those, only Supplier Deliveries (55.2 percent) and Inventories (50.8 percent) were in expansion in April — and those figures, Fiore reiterated, “are not good on their own merits,” indicative of trade turbulence, not demand.
The siren was the Production Index, which for much of the last three years has shown resiliency amid persistent sluggish demand. But in April, it registered 44 percent, a decrease of 4.3 percentage points compared to the previous month and the lowest reading since May 2020 (34.2 percent). That’s a blinking yellow light, Fiore said; anything below 44 percent is red.
“We’re heading in the wrong direction,” Fiore said. “The (Production Index) number is a signal for revenue. When companies lose revenue, they release more workers, and on we go.”
The Employment Index reading of 46.5 percent was an increase of 1.8 percentage points compared to March, but Fiore said that panelists’ companies were more likely to use layoffs to reduce head count, which indicates more urgency than waiting for attrition.
The New Export Orders Index fell 6.5 percentage points to 43.1 percent, a likely product of the friction between the U.S. and its closest trade partners, Canada and Mexico. The Prices Index registered 69.8 percent, an increase of just 0.4 percentage point — perhaps the closest thing to a ray of sunshine in the April data.
A whiff of stagflation in the April ISM purchasing managers' index survey of manufacturing firms
— Nick Timiraos (@NickTimiraos) May 1, 2025
Prices paid continues to accelerate while new orders and employment remains in contractionary territory. This wasn't the case in 2021, when all were in expansionary territory. pic.twitter.com/3ysQfpuZqj
After the March report, Fiore said that manufacturing could be in for a “rough ride” the rest of the year. With this week’s announcement that U.S. real gross domestic product decreased 0.3 percent in the first quarter and reports of dramatic reductions in container ship traffic, things could get worse before they get better — even with a resolution on trade. The U.S. Chamber of Commerce on Thursday implored the Trump administration to move in that direction.
“Domestic demand is weak and frozen because people aren’t sure where to spend their money,” Fiore said.
He added, “The administration has introduced an artificial constraint that is causing near-term confusion and complexity. That’s slowing down our supply chain, which is not lethal because the demand has been so weak. But when all that clears up, all these ships will sail in, and we could be looking at 50 ships waiting off the coast of California again.”
The April report was Fiore’s last as the face of the Manufacturing PMI®; he has served since May 2017. He will be succeeded by Sue Spence, MBA, who most recently centralized sourcing operations at global shipping giant FedEx and its divisions before retiring in 2023.
Spence’s resume includes more than 28 years of experience in aerospace procurement and manufacturing at United Technologies Corporation. She is the 2020 recipient of the J. Shipman Gold Medal Award, presented by ISM for career achievement.
The Report On Business® roundup:
Barron’s: U.S. Manufacturing Activity Contracts Amid Tariff Uncertainty. “Some businesses can’t be sure they can pass tariffs through to their customers and those customers are waiting to order until they have clarity on pricing. It’s a unique kind of business paralysis. … Looking ahead, investors would like to see more detail about how tariffs will impact production, pricing, orders, and overall manufacturing activity. Many tariffs have only been in place for weeks, and policies continue to change. There just isn’t much clarity yet.”
Bloomberg: U.S. Manufacturing Activity Shrinks by the Most Since November. “The figures illustrate an industrial sector struggling for traction as US tariffs and general uncertainty surrounding trade policy interrupt expansion plans. Orders shrank for a third month and backlogs retreated at a faster pace, consistent with subdued demand.”
CNBC: ISM Manufacturing Reading Beats Forecasts Despite Tariffs. “The headline number on manufacturing, expecting 47.9 percent, comes in better: 48.7 percent — but do remember this is the second consecutive read under 50,” analyst Rick Santelli said. “(The Prices Index), here’s the number we want to go down, but it’s been awfully, awfully stubborn to the upside. We were expecting a number over 70 percent, so the good news is it’s under 70 at 69.8 percent. The issue is that it’s basically still the highest levels that we’ve seen going all the way back to summer of 2022.”
US ISM'S FIORE: I DON’T THINK WE ARE IN RECESSION BUT ISM
— Mace News (@MaceNewsMacro) May 1, 2025
MANUFACTURING PMI INDICATES MOVING IN THAT DIRECTION #ISM #manufacturingindustry #recession #Economy
Manufacturing Dive: ‘We’re Headed in the Wrong Direction’: Tariffs Drive Up Prices, Hurt Output. “Across the broader supply chain, Fiore said he’s concerned about slower supplier deliveries due to a now lengthier customs process at U.S. ports as a result of the tariffs. While slower clearance processes aren’t currently a huge issue due to lower demand, (he) said a rebound in orders could lead to ships backed up off the coast of California just as there were during the pandemic.”
MarketWatch: ‘We’re on the Edge of the Cliff’: Trade Wars Plop Manufacturers Back Into a Slump, ISM Finds. “Trade wars have benefited a few manufacturers such as steelmakers, but most other companies face the prospect of weaker sales and higher costs due to the current level of tariffs. Although the economy is holding up so far, economists and business leaders warn tougher times are coming unless the trade disputes are resolved soon.”
Reuters: U.S. Manufacturing Sectors Slump Deepens in April. “Manufacturing is heavily reliant on imported raw materials. The second straight monthly decline in the PMI ended a brief recovery in manufacturing that had been driven by hopes for a less stringent regulatory environment from the Trump administration and interest rate cuts from the Federal Reserve.”
ISM’s Services PMI® will be unveiled on Monday, and the Hospital PMI® on Wednesday. For the most up-to-date content on the reports under the ISM® Report On Business® umbrella, use #ISMPMI on X, formerly known as Twitter.
(Photo credit: Getty Images/Kali9)