On Monday, May 3, the Institute for Supply Management (ISM) released data showing that the U.S. manufacturing ISM purchasing managers’ index fell to 60.7 in April from a record high of 64.7 in March since 1983, a figure significantly lower than the average estimate of 65.0 in a previous Reuters survey of economists.
After the release of the data, there are views that the supply chain continues to be challenged by the strong momentum of manufacturing output, resulting in a record backlog of orders and driving up material prices.
In terms of disaggregated indices.
▪ The new orders index recorded 64.3%, down 3.7 percentage points from March’s 68.0%.
▪ The production index registered 62.5%, down 5.6 percentage points from 68.1% in March.
▪ the employment index registered 55.1%, down 4.5 percentage points from 59.6% in March
▪ The supplier delivery index was 75.0%, down 1.6 percentage points from 76.6% in March
The backlog of orders index was 68.2%, up 0.7 percentage points from 67.5% in February.
Of note, the employment index among the above classifications fell to 55.1 in March after soaring to a high of 59.6 in March 2018, which was also well below the 61.5 forecast in the economists’ survey.Some market views suggest that the slowdown in hiring reflected in the data may be due to a scarcity of workers, although jobs are still 8.4 million lower than they were in February 2020, with many Companies in the industry are struggling to find workers. And this coincides with Powell’s statement at the FOMC rate meeting in April, when he said that the labor market remains weak and that there are many factors behind this.
In terms of industry breakdowns, similar to last month, no industry reported contraction among the 18 manufacturing branches covered by the ISM, with all six of the major branches showing expansion. With last month’s wording is different, ISM said in a press release this month, the six major branches in April were “moderate to strong” growth, in order: metal products, chemical products, food, beverage and tobacco products, computer and electronic products, transportation equipment, petroleum and coal products.
Timothy R. Fiore, chairman of the association’s manufacturing committee, said in the release of the report that the manufacturing sector performed well for the 11th consecutive month, with strong growth in demand, consumption and inputs over March. However, he also noted that
Manufacturing continued to see a recovery in April, although some respondents said their companies and suppliers were struggling to meet growing demand despite their best efforts. Record long lead times, widespread shortages of key basic materials, rising commodity prices and difficulties in shipping products are continuing to affect all parts of the manufacturing economy.
The above statement is largely consistent with his statement in the report in March.
Supply chain tensions are most evident in the automotive industry, after a number of car companies were forced to cut production due to a global shortage of semiconductor chips, with Ford CEO Jim Farley expecting to be forced to reduce planned production by 50 percent in the second quarter, much higher than the 17 percent drop in the first quarter, when he released his quarterly report. And Ford Chief Financial Officer John Lawler said that for all of 2021, Ford will cut production of about 1.1 million vehicles and lose $2.5 billion due to the chip problem.
Technology companies have also been hit by chip shortages, with Apple CEO Tim Cook and CFO Luca Maestri warning that tight global chip supply is curbing production and sales of iPads and Macs.
After the release of the data, the overall volatility of U.S. stocks, the three major indices were mixed, with the Dow and S&P, represented by traditional stocks, performing stronger than the Nasdaq, represented by technology stocks. At press time, the Dow was up 0.85%, the S&P was up 0.41%, and the Nasdaq was down 0.08%. 10-year U.S. bond yields fell 3.2 basis points to 1.599% during the day.
But compared with U.S. stocks, precious metals rose more significantly, spot gold rose more than 1.8% during the day, spot silver intra-day gains more once reached 4%.
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