While the dip in the headline number for the Institute of Supply Management (ISM) index for April -- a closely watched gauge of the health of the manufacturing sector -- was a little worse than expected, the report was still broadly consistent with an ongoing recovery in manufacturing. The index moderated to 53.9 in April from 55.6 in March (any reading over 50 still indicates economic expansion). The April reading of 53.9 has historically been consistent with GDP growth at a solid 4.1%.
The report indicated that 18 out of the 20 industries surveyed revealed growth in April. While the components were mixed relative to their respective March levels, most remained firm. New orders slipped to 59.0 from 65.3, production climbed to 58.0 from 57.8, and employment decreased to 46.7 from 47.5.
Possibly the biggest threat in the report was the jump in prices paid to 60.3 from 51.9 -- leaving the series at the highest level since January, 2001. The markets hope is that this represents just a lagged response to the jump in energy prices seen over the past few months. But continued strength in this series over the next few months could raise concerns at the Fed.
Overall, the figures in the April report are in agreement with the other manufacturing surveys already released on the month, such as the Philadelphia Fed index and the Chicago purchasing managers' report). The data suggest we should continue to see healthy growth in other factory-based reports later in the month.