Highlights

The ISM Manufacturing Index fell to 50.7 in April from 51.3 in March. The Briefing.com consensus expected the Index to decline to 51.0.

Key Factors

There were fears stemming from the weakness reported in just about all of the regional manufacturing surveys that the ISM Index would register its first contraction since November but that did not happen.
Looking over the details, the ISM report was actually fairly strong. The only big negative was the employment index falling four points, but it managed to remain barely above the expansion/contraction threshold at 50.2. This data point was confirmed in the earlier in the ADP Employment report, which showed a modest reduction in manufacturing payrolls.
Production and orders levels all strengthened in April. The Production Index increased to 53.2 in April from 52.2 in March. New orders growth accelerated as the respective index increased to 52.3 from 51.4. Meanwhile, order backlogs expanded for the third consecutive month as the index increased from 51.0 in March to 53.0 in April.
Unless new orders fall by a sizable margin next month, which is not outside the realm of possibility given the sudden decline witnessed in the Chicago region, the amount of unfilled orders should prevent production levels from contracting in May.

This is a highly overrated index. It is merely a survey of purchasing managers. It is a diffusion index, which means that it reflects the number of people saying conditions are better compared to the number saying conditions are worse. It does not weight for size of the firm, or for the degree of better/worse. It can therefore underestimate conditions if there is a great deal of strength in a few firms. The data have thus not been either a good forecasting tool or a good read on current conditions during this business cycle. It must be recognized that the index is not hard data of any kind, but simply a survey that provides broad indications of trends.

Category	APR	MAR	FEB	JAN	DEC
Total Index	50.7	51.3	54.2	53.1	50.2
Orders	52.3	51.4	57.8	53.3	49.7
Production	53.5	52.2	57.6	53.6	52.6
Employment	50.2	54.2	52.6	54.0	51.9
Deliveries	50.9	49.4	51.4	53.6	53.7
Inventories	46.5	49.5	51.5	51.0	43.0
Export Orders	54.0	56.0	53.5	50.5	51.5
Prices paid (not seas adj)	50.0	54.5	61.5	56.5	55.5