ISM Manufacturing Disappoints, Employment Tumbles, Inflation Shows “No Signs Of Relenting”

Analysts expected both ISM and PMI Manufacturing surveys to show improvement in April… and they did. However, S&P Global (Markit)’s Final print was notably below the preliminary print (59.2 vs 59.7 flash) but still above March’s print to its highest since Sept 2021 and ISM’s Manufacturing grossly disappointed, tumbling to its lowest since Sept 2020.

So take your pick – is US manufacturing the weakest since Sept 2020 or strongest since Sept 2021 just as Q1 GDP prints shockingly negative?

Source: Bloomberg

S&P Global reports that firms continued to pass higher material and staff costs on to clients in April, as the rate of charge inflation accelerated. The increase in selling prices was the fastest since last October

Contributing to the stronger upturn in the health of the manufacturing sector was a faster rise in output during April.

Meanwhile, new export orders grew at the fastest rate for almost a year.

Chris Williamson, Chief Business Economist at S&P Global, said:

“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. Demand from consumers and businesses is proving encouragingly robust despite severe inflationary pressures, which intensified further during April.

“Both input cost and selling price inflation surged higher, the latter accelerating to a near-record rate, as firms faced rising energy prices, ongoing supplier-driven price hikes amid strained supply chains, and rising wage costs.

“In short, while the survey data add to indications that the pace of economic growth will improve in the second quarter after a lacklustre first quarter, the less welcome news is that elevated inflationary pressures show no signs of relenting.”

On the ISM side, it was considerably uglier (we assume they must just ask different questions in their survey?)

With employment tumbling to its weakest since Aug 2021…

As one respondent noted “At some point, the economy must give way; it will be tough to have real growth with such pressure on costs.”

There is certainly nothing in this report that would slow The Fed’s plan to unleash hawkish hell on markets.