Economic activity in the manufacturing sector expanded in April for the fourth consecutive month, despite the war in Iran and rising prices, according to the Institute for Supply Management’s latest Purchasing Manager’s Index.
ISM’s index registered 52.7% in April, the same as in March. The overall economy continued expansion for the 18th month in a row. A PMI index below 50% indicates an industry in contraction.
The S&P Global US Manfacturing PMI showed a slightly higher rate of expansion, registering 54.5, up from 52.3 in March.
“Overall sentiment is down slightly” due to concerns about tariffs and the war in Iran, Susan Spence, chair of ISM’s Manufacturing Business Survey Committee, said during a media call on Friday.
“In this second month of the Iran War... 31% of the comments were positive and 69% negative,” Spence said in a news release. “Among comments, the war was mentioned in 47% and tariffs in 18%. As was the case [in March], some panelists referenced both topics within a single comment or in mixed sentiment.”
The New Orders Index registered 54.1%, up 0.6 percentage point compared to March; this was the fourth straight month of expansion after being in contraction for the four previous months. The Production Index registered 53.4%, 1.7 percentage points lower than in March.
The Supplier Deliveries Index indicated slowing performance for the fifth month in a row with a reading of 60.6%, up 1.7 percentage points from March. The Inventories Index registered 49%, up 1.9 percentage points.
The Employment Index registered 46.4%, down 2.3 percentage points. Manufacturing added 15,000 jobs in March, with the transportation equipment and fabricated metal products sectors gained the most jobs.
The Prices Index has increased 25.6 percentage points during the last three months to reach its highest level since April 2022, according to ISM.
Two of four demand indicators — the New Orders and Backlog of Orders indexes — remained in expansion, although the Backlog of Orders Index dropped 3 percentage points compared to March.
The New Orders Index expanded in April with a reading of 54.1%, up 0.6 percentage point from March. However, Spence said that according to a number of the positive comments, “customers were ordering to get ahead of” potential price increases from the war and additional tariffs.
Prices continue to rise
During the call, Spence noted that price increases were on the minds of many respondents, as they were in March. “Prices are once again the big story,” she said.
“If you look at the price increases in the first three months, we could probably confidently say the last 6% percent are due to the Iran war,” Spence said. "But they were rising pretty precipitously before that.”
All six of the largest manufacturing industries — Chemical Products; Petroleum & Coal Products; Machinery; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Transportation Equipment, in that order — reported price increases in April, ISM said.
Some commenters said that demand for manufactured goods continues to trend higher than last year, but it is being weighed down by the Iran war and rising energy prices. Others noted continuing risks to supply chains, market constraints for various materials, and volatility in commodity markets.
As for tariffs, companies received some relief from the U.S. Supreme Court’s ruling overturning many of the Trump administration’s original tariffs under the International Emergency Economic Powers Act. However, many commenters said their business operations were being affected by continued uncertainty around tariffs imposed under other authorities.
All of this has Spence “a bit concerned,” she said. “We are still in growth mode, but it is slowing down a bit.”
