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The manufacturing sector contracted at a faster pace for the 2nd straight month, according to the ISM Purchasing Managers Index for April.

In fairness, manufacturing has been contracting for all but 2 months over the last 2.5 years, and remains above the 42.3 level which would signal the overall economy is in contraction.

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All three of the forward looking components within the index (new orders, production, employment) remain in contraction territory, although new orders & employment improved slightly.

New orders increased from 45.2 to 47.2, with 8 industries reporting growth.

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Production fell from 48.3 to 44.0 with 7 industries reporting growth.

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Employment increased from 44.7 to 46.5, with 5 industries reporting growth.

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The prices paid index continues to increase at a faster pace, with 15 of the 18 manufacturing industries reporting having to pay higher prices for inputs.

As you can imagine, all the responses had to do with the tariffs. A couple of examples:

 Chemical products company cites being hit double by the new policies. Once from the suppliers that generate a tariff, and then from different suppliers that pass on surcharges in the form of price increases

 “Tariffs impacting operations — specifically, delayed border crossings and duties calculations that are complex and not completely understood. As a result, we are potentially overpaying duties. Unsure of potential drawbacks. Implementation of tariffs and their application is sudden and abrupt. The business is taking countermeasures.” [Transportation Equipment]

 “Strategic procurement and the supply chain are paralyzed in a world that changes daily due to tariffs.” [Nonmetallic Mineral Products]

The list goes on. Unfortunately small and mid sized businesses will probably be hurt the most from this.

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