April Institute for Supply Management

More than histamines are active this time of year.  Both segments of the economy accelerated in April according to the Institute for Supply Management (ISM).   Manufacturing’s index grew to 54.9 from 53.7 in March.  Services’ uptick was even stronger, moving to 55.2 from 53.1.  Any reading above 50 suggests expansion in the period.

Employment was mixed between the two measures, thus adding to the confusion about the state of the labor market.  Manufacturing’s uptick was largely lead by the employment tally within the indicator.  This acceleration corroborates the latest employment report.  However, growth in non-manufacturing employment (the largest segment of the economy) slowed in the period which is the cause of the added confusion.

New orders continued to expand in both areas of the economy.  Manufacturing orders grew at the same pace as the prior month.  This is the 11th month in a row of growing orders in this portion of the economy.  Nonmanufacturing orders have grown for 57 consecutive months and even accelerated in April.  Orders are seen as a leading indicator because output is required to complete them.

Output, according to the ISM indices, continued to expand in April, suggesting the second quarter started out better than the first quarter ended.  Service activity/production jumped 7.5 percentage points to 60.9 and also put in a 57th consecutive month of expansion.  Manufacturing output grew but did so at a slower rate than in March.

Other than the confusion this indicator created about the labor market, April’s ISM data is favorable.  Upticks in both segments of the economy point to a healthy start to the second quarter.  Harsh weather plagued the nation in the first few months of the year, so the ISM data may be reflecting a snapback of the demand deferred during the challenging winter.  With any luck, unforeseen forces will not tamper with the inertia.         (by C. Cox)