US: Decline in ISM Manufacturing indicates continued growth - Nomura

Analysts at Nomura note that the US ISM manufacturing index declined 2pp to 57.3 in April, below expectations (Nomura: 59.0, Consensus: 58.4) and the decline was driven primarily by declines in the production index (-3.8pp to 57.2), employment index (-3.1pp to 54.2) and inventories index (-2.6pp to 52.9).

Key Quotes

“The new orders index declined marginally by 0.7pp to 61.2, below its six-month average of 64.0 but a solid reading that remains consistent with steady domestic and global demand.”

“The subindices in general pointed to a step down in the pace of growth but registered expansionary readings nonetheless. However, the decline in the employment index could indicate some downside risk to manufacturing employment growth in April. The prices paid index increased 1.2pp to 79.3, the highest reading since April 2011, suggesting sustained and increasing upstream price pressures. Some respondents noted that the steel and aluminum tariffs had materially raised input costs.”

“With an uncertain outlook for trade policy, manufacturer sentiment may decline further over the next few months. Today's ISM manufacturing survey responses are consistent with some angst from trade policy spilling over into overall business confidence. That said, excluding tariff concerns, steady demand should bolster manufacturing activity over the medium term.”