|

US ISM Manufacturing PMI April Preview: Let the good times roll

  • Manufacturing outlook expected to edge higher from March record.
  • New Orders Index building on the best nine months in four decades.
  • First quarter Retail Sales boost manufacturing optimism.
  • Manufacturing PMI is an indicator for overall economic health.
  • Markets will note but not trade on these PMI figures.

The US manufacturing sector looks to continue its boisterous ways with executive sentiment and new business setting records as the US economy powers out of the pandemic. 

The Purchasing Managers’s Index (PMI) from the Institute for Supply Management is forecast to rise to 65 in April from its 38-year high of 64.7 in March. The Prices Paid Index will dip to 85 from 85.6. New Orders were 68 and the Employment Index was 59.6 in March.

Manufacturing PMI

The production sector has been on a strong upswing for four months. 

The 61.2 average of the last four months for the Manufacturing Purchasing Managers' Index from the Institute for Supply Management is the highest since March 1984. New Orders have averaged 64.7 for the nine months from July through March and that is the highest three-quarters of a year since August  2004.

Reuters

Employment has lagged the general improvement in the manufacturing indexes but the three month average of 55.3 is the best of the pandemic era.

The New Orders Index is the best indicator of the flood of business that has buoyed the factory sector and prompted the near-historic levels of optimism. 

Originating in the spate of delayed orders in the second half of last year after the collapse in March, April and May, the factory order book was given a second fillip by the surge of Retail Sales in the first quarter.  

Reuters

Retail Sales

Aided by the two stimulus awards of $600 in January and $1400 in March and the red-hot job market, US consumers boosted Retail Sales by 4.90% in the first quarter. The  Control Group category that enters the GDP calculation, was scarcely less active, averaging 4.07% for the quarter. Consumer spending accounts for about 70% of US economic activity, with these sales figures it is hardly surprising factory managers are optimistic. 

Retail Sales

FXStreet

Conclusion

The manufacturing sector, though only about 15% of US GDP is considered an indicator for the welfare of the overall economy.  

The waning of the pandemic has not only released a tide of business delayed by last year's lockdowns, but consumers are spending in relief and enjoyment. Congress will pass some version of the Biden administration’s infrastructure bill adding to the flood of spending coming out of the capitol. 

That era of good feeling is likely to last well into the second half as even the die-hard centers of restriction like New York City end their business inhibitions by July 1.

Managers have every reason to expect the good times to last until the end of the year. 

Premium

You have reached your limit of 3 free articles for this month.

Start your subscription and get access to all our original articles.

Subscribe to PremiumSign In

Author

Joseph Trevisani

Joseph Trevisani began his thirty-year career in the financial markets at Credit Suisse in New York and Singapore where he worked for 12 years as an interbank currency trader and trading desk manager.

More from Joseph Trevisani
Share:

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

By subscribing you agree to our Terms and conditions.

Editor's Picks

EUR/USD drops to daily lows near 1.1630

EUR/USD now loses some traction and slips back to the area of daily lows around 1.1630 on the back of a mild bounce in the US Dollar. Fresh US data, including the September PCE inflation numbers and the latest read on December consumer sentiment, didn’t really move the needle, so the pair is still on course to finish the week with a respectable gain.

GBP/USD trims gains, recedes toward 1.3320

GBP/USD is struggling to keep its daily advance, coming under fresh pressure and retreating to the 1.3320 zone following a mild bullish attempt in the Greenback. Even though US consumer sentiment surprised to the upside, the US Dollar isn’t getting much love, as traders are far more interested in what the Fed will say next week.

Gold makes a U-turn, back to $4,200

Gold is now losing the grip and receding to the key $4,200 region per troy ounce following some signs of life in the Greenback and a marked bounce in US Treasury yields across the board. The positive outlook for the precious metal, however, remains underpinned by steady bets for extra easing by the Fed.

Crypto Today: Bitcoin, Ethereum, XRP pare gains despite increasing hopes of upcoming Fed rate cut

Bitcoin is steadying above $91,000 at the time of writing on Friday. Ethereum remains above $3,100, reflecting positive sentiment ahead of the Federal Reserve's (Fed) monetary policy meeting on December 10.

Week ahead – Rate cut or market shock? The Fed decides

Fed rate cut widely expected; dot plot and overall meeting rhetoric also matter. Risk appetite is supported by Fed rate cut expectations; cryptos show signs of life. RBA, BoC and SNB also meet; chances of surprises are relatively low.

Ripple faces persistent bear risks, shrugging off ETF inflows

Ripple is extending its decline for the second consecutive day, trading at $2.06 at the time of writing on Friday. Sentiment surrounding the cross-border remittance token continues to lag despite steady inflows into XRP spot ETFs.