The manufacturing sector made slight progress in the month of March, and evidence points towards a similar outcome for April.
Regional indexes from the Chicago and Philadelphia Fed declined last month, also signaling that the ISM number may not spike drastically.
“The surveys were kind of a mix and they were showing weak numbers,” pointed out Oscar Muñoz, an economist at TD Securities, LLC.
The report last month revealed that the economy is slowly cooling down despite inflation; there were new hires across the board and factories were able to keep up with demand. Here are five things to watch out for:
The Institute for Supply Management’s manufacturing index is a measure of factory activity based on surveys from supply managers. The monthly index covers 11.9 percent of the U.S. economy and readings over 50 percent show that the sector is growing.
Supplier deliveries came down last month thanks to a larger workforce. This shows that factories are mobilizing, despite the supply-chain constrained economic climate.
Demand was never an issue amid the pandemic; factories had a hard time securing raw materials to make their products. Inventories grew last month in March, eyes will be on this score to see if there has been any improvement.
Economists hope for this number to dip. Due to inflation, it has been at 87.1, a 40-year record high. The ISM index overall scored 57.1 for the month of March; based on last month’s report and other signs from the economy, it is projected to roughly stay the same at 57.0.
Employment was high in March, pointed out at the latest jobs report. Economists look forward to a higher number for April.
China’s shutdown due to the arrival of COVID-19 completely upended the supply chain, and Backlog Orders peaked in October of 2021. Fortunately, it has been declining since. From a 65.0 in February, it dropped 5 percentage points in March. General concern from economists would arise if there is a jump for April; otherwise, it's a good sign, indicating that inflation is cooling down.
China’s recent port crisis due to its shutdown amid COVID-19 spikes could play out as a turnpike later on in 2022, but it might be too early to see its repercussions in the coming indicator score.
“The situation will cast a very long shadow in the supply chain in the second half of the year,” said Jay Bryson, Managing Director and Chief Economist for Wells Fargo Securities, LLC.