The April PMI manufacturing index dropped for a second straight month, but demand remains strong amid a tight supply chain and tariff uncertainty

01 May, 2018

Bobby Bono
Industrial Manufacturing Leader, PwC US
Michael Goulet

The ISM Purchasing Manager’s Index (PMI) for manufacturing survey dropped for a second straight month to 57.3 – a 3.5 point drop from its February’s high of 60.8. While the PMI is indicative of slower growth, manufacturing is still expanding for a 20th consecutive month, new orders remain strong (61.2), and the PMI index remains in the top quintile range. The April drop was largely driven by slower production (a 3.8 point drop from 61 to 57.2). Slower production is being driven by continued tightness in the supply chain, including labor constraints and disruptions that appear to be limiting production from reaching its potential.

Additionally, prices continue to rise and temper growth; the prices index rose to its highest level since 2011. It is difficult to foresee this tightness correcting itself until we have more certainty over the proposed tariffs, which are making business planning and investment decisions difficult.