KPI – April 2024: State of Manufacturing

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Economic activity in the manufacturing sector expanded in March after contracting for 16 consecutive months, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®. The Manufacturing PMI® registered 50.3% in March, up from 47.8% a month prior.

“The U.S. manufacturing sector moved into expansion for the first time since September 2022. Demand was positive, output strengthened and inputs remained accommodative,” says Timothy R. Fiore, CPSM, C.P.M., chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. 

Data shows demand is in the early stages of recovery, with clear signs of improving conditions. Production execution surged compared to January and February, as panelists’ companies expanded. Overall, Fiore says suppliers continue to have capacity but are “showing signs of struggling” in connection to raw material supply chains. 

“[Approximately] 30% of manufacturing GDP contracted in March, down from 40% in February,” Fiore says. “More importantly, the share of sector GDP registering a composite PMI® calculation at or below 45% – a good barometer of overall manufacturing weakness – was 1% in March. That’s the same as in February, but categorically healthier than the 27% recorded in January. Among the top six industries by contribution to manufacturing GDP in March, none had a PMI® at or below 45%.” 

KPI - April 2024: State of Manufacturing | THE SHOP

Caption: U.S. new vehicle sales increased 5.1% in Q1 2024, as buyers pulled the trigger on purchases despite persistently high interest rates. GM (Silverado and Sierra) took first place in full-size truck sales during Q1 (198,584 units), with the Ford F-Series securing runner-up at 152,943 units. In addition, Toyota, Honda, Volkswagen and Nissan posted significant year-over-year gains – at 20.3%, 17.3%, 21% and 7.2%, respectively. 

Important Takeaways, Courtesy of the Manufacturing ISM® Report On Business®:

  • Demand improvement was reflected by the (1) New Orders Index reaching expansion with fewer comments regarding softening; (2) New Export Orders Index expanding again, supported by panelists’ stronger optimism; (3) Backlog of Orders Index remaining in moderate contraction territory, similar to February; and (4) Customers’ Inventories Index contracting for the fourth consecutive month, remaining at a level accommodative for future production. 
  • Output (measured by the Production and Employment indexes) jumped, with a combined 7.7-percentage point upward impact on the Manufacturing PMI® calculation. Panelists’ companies notably increased their production levels month-over-month; though head-count reductions continued in March, with sizable layoff activity reported. 
  • Inputs – defined as supplier deliveries, inventories, prices and imports – continued to accommodate future demand growth and showed signs of stiffening. 
  • The Supplier Deliveries Index dropped marginally, moving into “faster” territory. 
  • The Inventories Index improved but remained in slight contraction territory. 
  • The Prices Index moved further upward in moderate expansion (or “increasing”) territory, as commodity driven costs remain unstable.

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