Manufacturing sector shrinks again in April as tariffs hit businesses
Add Axios as your preferred source to
see more of our stories on Google.
Manufacturers keep taking it on the chin, according to some of the first data on how the factory sector held up in April, released on Thursday.
Why it matters: Manufacturers reported plummeting production, higher material costs and a drop-off in imports and exports.
- "Demand and output weakened while input strengthened further, conditions that are not considered positive for economic growth," ISM's chair Tim Fiore said in a release.
By the numbers: The Institute for Supply Management's purchasing manager's index for manufacturers fell to 48.7%, down 0.3 percentage point from March. Any reading below 50 indicates falling activity.
What they're saying: "The most important topic is tariffs," a respondent in the food manufacturing industry said — among the anecdotes that universally suggested tariffs were hurting business.
- "Supplier relationships are strained by pain-share negotiations, and competitors are gaining share by importing from lower-tariff regions."
The intrigue: Respondents "continued to release workers" and "generally opted for layoffs because they are quicker to implement than attrition," Fiore said.
- Manufacturing output fell to the the lowest since May 2020, suggesting "US manufacturing production is languishing due to the economic uncertainty being generated by the on-off-on tariff policy," says ING chief international economist James Knightley.
State of play: The report follows other indicators this week that point to softening economic activity.
- Construction spending fell by a half-percentage point in March, the government said on Thursday — prompting concerns that uncertainty over tariffs has builders on the sidelines.
- The Labor Department also said unemployment filings jumped last week. Initial jobless claims came in at 241,000 — roughly 18,000 above last week's upwardly revised figures.
- The weekly data can be noisy. The four-week moving average, which smooths out volatility, rose to 226,000 — an increase of 5,500 filings from the previous week. But that level remains below the most recent peak in mid-March.
What's next: The April jobs report, due out at 8:30am ET Friday, is expected to show payroll gains of 133,000 and an unemployment rate unchanged at 4.2%.
Editor's note: This story has been updated with government data on the construction sector.
