Manufacturing, GDP growth falter

Milwaukee-area manufacturing activity stalled in April after growing in March, according to a new report from the Institute for Supply Management-Milwaukee.

The Marquette-ISM Report on Manufacturing showed the Purchasing Managers Index was at 47.26 in April, down from 56.03 in March.

Any reading above 50 indicates growth, while below 50 suggests contraction. The PMI also dipped below 50 in February.

Respondents in the April survey said:

  • “Beginning of our summer lift.”
  • “Gained a new, non-automotive customer.”
  • “Lead times getting really bad.”
  • “What exactly do distributors do if they aren’t stocking parts?”
  • “Most commodities readily available, prices up slightly on chemicals.”

New orders were down 20.5 percent and production was down 21.4 percent in April.

The blue collar employment index was down, at 48.3, and the white collar employment index was up, at 52.1. Respondents indicated attrition is not being filled and direct labor lay off is continuing, with some salaried attrition.

The six month outlook indicated 57.1 percent of respondents expect conditions to remain the same, up from 42.9 percent in March. And 23.8 percent expect more positive conditions, down from 42.9 percent in March. Finally, 19 percent expect worse conditions, up from 14.3 percent last month.

The U.S. Department of Commerce also announced today that the gross domestic product grew just 0.1 percent in the first quarter, hovering close to recession.

The figure missed the most conservative predictions of a 1.1 percent growth rate.

The fourth quarter 2013 GDP was 2.6 percent, nearly meeting economists’ expectations of 2.7 percent growth.

Financial markets haven’t significantly reacted to the news, since the slow growth was attributed to harsh winter weather.

And the GDP report doesn’t jibe with recent earnings reports showing record corporate profits.

“For those companies that have reported, results show overall earnings grew by more than 3 percent and revenue gains of 2.8 percent,” said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird & Co. Inc., in his market update. “Given the huge amount of buybacks the past several years, income statements are now highly levered. Should the economy experience stronger growth earnings, (it) should benefit by a disproportionate rate.”

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