April ISM Index

Updated 25-May-11 21:11 ET


  • The ISM Manufacturing Index declined from 61.2 in March to 60.4 in April.
  • The consensus expected the ISM index to fall to 59.7.

Key Factors

  • While the ISM data show a manufacturing slowdown occurred in April, the regional Federal Reserve manufacturing surveys suggested a much greater pullback in manufacturing activities. This suggests the ISM Manufacturing Index may overstate the April industrial production data.
  • The details of the data, however, continue to look promising for the manufacturing sector.
  • Both the production index and new orders index decelerated in April, yet both indices remained above 60.0 -- production declined from 69.0 to 63.8 and new orders fell from 63.3 to 61.7 -- and are entrenched above the 50.0 expansion/contraction threshold.
  • The order backlogs index jumped from 52.5 to 61.0. The index suggests that manufacturers are well positioned for future production growth even if new orders decelerate further.
  • The employment index fell from 63.0 to 62.7. The minor decline is not enough to alter current employment forecasts.

Big Picture

  • This is a highly overrated index.  It is merely a survey of purchasing managers.  It is a diffusion index, which means that it reflects the number of people saying conditions are better compared to the number saying conditions are worse.  It does not weight for size of the firm, or for the degree of better/worse.  It can therefore underestimate conditions if there is a great deal of strength in a few firms.  The data have thus not been either a good forecasting tool or a good read on current conditions during this business cycle.  It must be recognized that the index is not hard data of any kind, but simply a survey that provides broad indications of trends.

Total Index 60.4 61.2 61.4 60.8 58.5
  Orders 61.7 63.3 68.8 67.8 62.0
  Production 63.8 69.0 66.3 63.5 63.0
  Employment 62.7 63.0 64.5 61.7 58.9
  Deliveries 60.2 63.1 59.4 58.6 56.7
  Inventories 53.6 47.4 48.8 52.4 51.8
  Export Orders 62.0 56.0 62.5 62.0 54.5
  Prices paid (not seas adj) 85.5 85.0 82.0 81.5 72.5