Manufacturing Index Hits 6-Month Low

The Markit U.S. Manufacturing Purchasing Managers' Index (PMI) fell 4.8% to 52 for April, according to a Markit report (link opens a PDF) released today.

Athough an above-50 reading denotes positive change from the previous month, these newest numbers put the index at a six-month low. Analysts had expected a slight dip to 54.2 from March's final 54.6 reading. Last month's flash index clocked in at 54.9, "consistent with a solid rate of growth."

The "flash" estimate is typically based on approximately 85% to 90% of total PMI survey responses each month and is designed to provide an accurate advance indication of the final PMI data.

Backlogs of work and stocks of purchases both contracted from March to April, while output, new orders, employment, and quantity of purchases all slowed their expansion. The drop in new orders from 55.4 to 51.8 marks the weakest improvement in six months and is especially troubling for future outlooks.

Output prices and import prices both rose at a slower rate, while new export orders and stocks of finished goods expanded at a faster rate.

Chief economist Chris Williamson was quoted as saying:

"The biggest monthly fall in the PMI since June 2010 raises concerns that the U.S. manufacturing expansion is losing momentum rapidly as businesses and households worry about the impact of tax hikes and government spending cuts. The PMI suggests that output growth has slowed from an annual pace approaching 8% earlier in the year to only 2% at the start of the second quarter."

Williamson's words hint at a less-than-stellar Q1 GDP growth rate (to be announced this Friday) but point to more serious growth issues setting in hard for the second quarter.

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