U.S. manufacturing activity contracts less than expected in April - ISM

A report from the Institute for Supply Management (ISM) showed on Friday the U.S. manufacturing sector's activity contracted sharply in April.

The ISM's index of manufacturing activity came in at 41.5 percent last month, down 7.6 percentage points from the February reading of 49.1 percent. The latest reading pointed to the steepest pace of contraction in the manufacturing sector since April 2009. Economists' had forecast the indicator to fall to 36.9 percent.

A reading above 50 percent indicates expansion, while a reading below 50 percent indicates contraction.

According to the report, the New Orders Index stood at 27.1 percent in April, a decline of 15.1 percentage points from the March reading, while the Production Index registered 27.5 percent, down 20.2 percentage points compared to the March reading, the Backlog of Orders Index posted 37.8 percent, a drop of 8.1 percentage points compared to the March reading, and the Employment Index came in at 27.5 percent, a fall of 16.3 percentage points from the March reading. Meanwhile, the Supplier Deliveries Index registered 76 percent, up 11 percentage points from the March reading, limiting the decline in the composite PMI.

Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee, noted that comments from the panel were strongly negative regarding the near-term outlook, with sentiment clearly impacted by the coronavirus pandemic and continuing energy market recession. He also added that the past relationship between the PMI and the overall economy indicates that the PMI for April (41.5 percent) corresponds to a 0.4-percent decrease in real GDP on an annualized basis.