The Institute for Supply Management (ISM) released its Manufacturing ISM Report on Business on Wednesday, revealing that economic activity in the sector dipped from 55.3 in March to 52.8 in April, failing to meet market expectations of 55.
Key Takeaways
- ISM PMI came in at 52.8, with the slowdown defying expectations of an almost-flat reading.
- US Government debt prices rose following the report and yields dipped, overshadowing strong labor market activity.
- Economic activity in manufacturing is now at the slowest pace since October 2016.
Manufacturing has dipped beneath a two-year low, and has been trending downwards since last September overall with trade protectionist policies amid the ongoing US/Beijing trade war partially to blame. However, a general slowdown in global economic activity has also impacted the US manufacturing industry.
New orders dropped 5.7 points to 51.7 from March’s reading of 57.4 The production index dipped d3.5 points to 52.3. Employment dropped 5.1 points to 52.4, and prices fell 4.3 points to 50. The indices for suppliers and inventories rose 0.4 and 1.1 points respectively in April.
Gold jumps over $4 an ounce after worse-than-expected ISM Manufacturing PMI, which printed 52.8 vs. the expected 55.0 and the previous 55.3. Trader now await the FEDs Monetary Policy update later today at 7pm #forextrading #GOLD pic.twitter.com/H9H4PermvG
— SIG Trading (@sig_trading) May 1, 2019
Expert Outlook
"Comments from the panel reflect continued expanding business strength, but at the softest levels since the fourth quarter of 2016," said Timothy R. Fiore, Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.
“ISM Manufacturing for April disappointed across the board,” said Jon Hill, rates strategist at BMO Capital Markets, in a note. The number contrasts “with the narrative of a stabilizing economy.”
“For now, we’re interpreting the flattening of the curve as reflecting the assumption that the Fed will remain stubbornly on hold while inflation remains elusive and growth worries persist,” Hill added.
Market Reaction
The greenback has wavered following the weak manufacturing report which also correlates with a dip in yields. More off-risk assets like gold have benefited. Spot gold has ticked upward, although still down -0.24% on the day, last trading at $1,279.77/oz.
Gold Price Chart
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