US manufacturing continued to decline in April, as import tariffs pushed up input costs and forced some businesses to lay off workers.
The Institute for Supply Management (ISM) announced on May 2 that its US Purchasing Managers' Index (PMI) fell to 48.4 in April, the lowest in five months and the second straight month of decline.
A PMI below 50 indicates contraction in manufacturing activity. The sector accounts for about 10.2% of the US economy.
The PMI data showed that President Donald Trump's protectionist trade policies are hurting the manufacturing sector. Businesses across all sectors surveyed by the ISM said import tariffs were a serious problem, with some complaining about the disorderly way they were imposed.
So far, the US has imposed a 10% import tax on all trading partners, with Canada and Mexico imposing 25% and China 145%. Products such as aluminum, steel, and cars are also subject to separate tariffs. China and Canada have both launched retaliatory measures.
"We expect the decline in the manufacturing sector to be more severe this summer, even if import tariffs, especially on Chinese goods, are eased in the coming time," said Ben Ayers, senior economist at Nationwide.
The US manufacturing sector relies heavily on imported raw materials. The second consecutive month of PMI decline has ended the sector's short-lived recovery. Previously, US manufacturing increased thanks to expectations of a looser regulatory environment under Mr. Trump and the Fed cutting interest rates.
In April, 11 manufacturing sectors recorded growth, including electrical equipment, electronic products, and machinery. Meanwhile, six sectors reported declines, including furniture, paper, and transport equipment.
Transport equipment manufacturers said the tariffs were affecting their operations. In particular, "cross-border delivery delays and complicated and confusing import duty calculations" were cited by electronic equipment and computer firms as "all imports from China are being held up". In addition, current costs are unaffordable for both businesses and customers.
The new orders index rose to 47.2 in April from 45.2 the previous month, as businesses continued to place orders before the tariffs took effect. However, factory output remained low amid long delivery times. The supplier deliveries index rose to 55.2 in April from 53.3 in March. A reading above 50 indicates a slowdown in the pace of deliveries.
Factory inventories continued to rise, albeit at a moderate pace. "Inventory growth is not a positive sign in a context of weak demand. It is a temporary response to avoid import tariffs. Inventories will fall again when the trade issue is resolved," said Timothy Fiore, chairman of the ISM Manufacturing Business Survey Committee. Meanwhile, delivery times lengthened as businesses rushed to import goods, and goods were delayed at ports.
The input price index rose to 69.8, its highest level since June 2022. Factories continued to cut jobs. "Many companies are choosing to lay off workers because it is faster than letting them leave," Fiore said.
However, most businesses are still waiting to see where the tax policy will go and are not in a hurry to cut staff en masse. Others are cautious about recruiting more workers.
(according to Reuters)