Manufacturing sector shows contraction in April

A key measure of Milwaukee-area manufacturing activity indicated contraction in April. The seasonally adjusted Purchasing Managers Index was below 50 for the first time since April 2014, according to the Marquette-ISM Report on Manufacturing.

The PMI was at 48.08 in April, down from 53.25 in March. Any number more than 50 indicates growth, while less than 50 signals contraction. The PMI has measured above 50 for 17 of the past 20 months.

In the April survey, respondents said:

  • Several new orders have been coming in recently. The issue is that customers want their product(s) right away, however, [our] products are custom made and need to be engineered. The primary delay is that parts need to be purchased to complete these orders.
  • Business conditions have been a bit worse than last year due to lagging sales. The biggest issue still is finding viable suppliers with superior customer service. There appears to be a lack of caring by businesses that the companies are dealing with.
  • Scrap steel prices have been falling fast.
  • Efforts have been made to start marketing more export business.

New orders, employment, supplier deliveries and imports grew in April, while production, inventories, customers’ inventories, prices, backlog of orders, exports and imports declined.

Regarding these indices, respondents said:

  • There have been unplanned customer order pullouts.
  • Orders are coming in strong but this will not have an effect on production for several weeks.
  • The West Coast congestion has been clearing. Consequently, shipments that were once caught on the West Coast have begun flowing in now.
  • Backlogs have increased due to the increase in orders.

Seasonally adjusted blue collar employment increased from 51.9 in March to 52.6 in April, while seasonally adjusted white collar employment declined from 46.1 in March to 44.6 in April.

In the six-month outlook on business conditions, respondents indicated a downward shift in positive expectations compared with March. Approximately 46.2 percent of respondents expect positive conditions over the next six months, 53.8 percent expect conditions to remain the same and none of the respondents expect conditions to worsen within the next six months.

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