In April 2025, the US manufacturing PMI index fell to 48.7, indicating a continued contraction.

In April 2025, U.S. manufacturing activity further contracted, with the ISM Manufacturing PMI dropping from 49.0 in March to 48.7, staying below the 50-point mark for the second month in a row, signaling a contraction. Even though there was a slight improvement in new orders and employment, the decline in output, rising price pressures, and fewer export orders highlight multiple challenges. Uncertainty around tariff policies and supply chain bottlenecks are adding to the pressures on businesses.

Manufacturing PMI Below the Expansion Threshold for the Second Consecutive Month

According to the Manufacturing Business Report released by ISM on May 1, the manufacturing PMI for April was 48.7, down 0.3 percentage points from March's 49.0, slightly above the market expectation of 48.0. This figure marks the second consecutive month that manufacturing has been in the contraction territory. ISM Chairman Timothy R. Fiore noted, "Both demand and output have weakened, while input costs have further increased, which is not conducive to economic growth."

The ISM report indicates that the overall economy has expanded for the 60th consecutive month, but manufacturing has frequently fluctuated between contraction and expansion since the pandemic began in April 2020. This PMI decline also ends the brief recovery momentum at the beginning of the year.

Weak Performance in Output and New Orders

The Production Index for April fell sharply from 48.3 in March to 44.0, indicating a significant weakening in factory production activities. This is the first time the index has fallen below 45 since April 2024, indicating a return to contraction.

The New Orders Index rose from 45.2 in March to 47.2, although still in the contraction territory, it shows that the rate of order decline has slowed. According to ISM data, this is the third consecutive month of contraction for new orders, and it remains below the 12-month moving average of 48.5.

In terms of exports, the New Export Orders Index dropped sharply from 49.6 in March to 43.1, marking the largest single-month drop since the early days of the pandemic in 2020. ISM pointed out that this drop is the most severe outside of the COVID-19 pandemic, reflecting the pressure on exports from weak international demand and trade policy uncertainties.

Continued Employment and Price Pressures

The Employment Index recorded 46.5 in April, slightly up from 44.7 in March, indicating a slower pace of layoffs in manufacturing. However, the index remains in the contraction territory and has shown contraction in 29 of the past 36 months.

The Prices Index rose from 69.4 in March to 69.8, the highest level since June 2022. This is the seventh consecutive month of increase for the index, reflecting continued rises in raw material prices. ISM noted that five of the six major manufacturing industries reported price increases, including machinery, chemicals, and food and beverages.

The Supplier Deliveries Index also rose from 53.5 in March to 55.2, indicating further slowing in delivery speeds. This change, along with rising prices, suggests that supply chain pressures have not yet eased.

Tariff Policy and Business Responses

The ISM survey for April covered the period when the U.S. government announced the "Freedom Day" tariff policy. This policy imposed broad tariffs on imports from most trade partners, including raising tariffs on Chinese goods to 145%. This move sparked a trade war with China and impacted manufacturing industries reliant on imported raw materials.

S&P Global's manufacturing PMI remained flat at 50.2 in April, the same as March, below the market expectation of 50.7. The report noted that businesses are facing difficulties in dealing with supply chain issues and inflationary pressures. S&P Global Ratings Chief Economist Paul Gruenwald stated, "These policy uncertainties have transmitted from the market to the real economy."

The ISM report also included feedback from businesses across various industries. Jefferies U.S. Economist Thomas Simons noted that most businesses reported "almost impossible to conduct business planning," describing the current situation as "nearly paralyzed." He added, "The tone of these comments is consistent with PMI readings in the 20s or 30s, and it's surprising that the index can still remain above 40."

Industry Performance and Order Backlogs

Among the six major manufacturing industries, only the computer and electronic products industry reported an increase in order backlogs in April. The overall Backlog of Orders Index fell from 44.5 in March to 43.7, marking the 31st consecutive month of contraction. This trend indicates that despite a slight recovery in new orders, overall demand remains insufficient to support an increase in capacity utilization.

Additionally, the Import Index saw its first decline since December last year in April, indicating that businesses may have accelerated imports to cope with the risk of rising tariffs. The large volume of imports in the first quarter also put pressure on the Gross Domestic Product (GDP).

In April 2025, the US manufacturing PMI index fell to 48.7, indicating a continued contraction.

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