ISM Manufacturing Index Slides to 54.8 in April -- 2nd Update

By Jeffrey Sparshott Features Dow Jones Newswires

U.S. factory activity eased in April, leaving growth on a solid if somewhat slower trajectory heading into the second quarter of the year.

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The Institute for Supply Management on Monday said its closely watched index of U.S. manufacturing activity fell to 54.8 in April from 57.2 in March. A number above 50 indicates expansion.

That was the second straight monthly decline and mirrors other surveys that showed soaring optimism following the election of Donald Trump settling down to more sustainable levels.

"Activity in the manufacturing sector is now expanding more in line with the pace of underlying economic activity," Gregory Daco, chief U.S. economist at Oxford Economics, said in a note to clients.

Even with the April setback, ISM manufacturing readings for each month this year have been higher than any month in 2015 or 2016. Sub indexes that fell most sharply -- the new orders index fell 7 percentage points to 57.5, and employment sank 6.9 points to 52 -- remain in positive territory.

U.S. factory activity was stagnant through long stretches of 2015 and 2016, while the energy sector slumped and a strong dollar made American goods more expensive overseas.

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More recently, stabilizing commodity prices and improving global demand have supported the sector. Overseas demand has been particularly strong in recent months. The ISM index for exports last month rose to its highest level since November of 2013.

The broader economy, however, has sent mixed signals in recent months. The labor market slowed in March and gross domestic product, a broad measure of economic output, was tepid in the first quarter.

Some other survey data has fallen amid lowered expectations for quick action on taxes and infrastructure spending from the Trump administration.

The National Federation of Independent Business optimism index, for example, touched its highest level since December 2004 in January, but has declined each month since. The University of Michigan consumer sentiment index hit a 13-year high in January but hasn't maintained that lofty level.

The ISM manufacturing index in February reached its highest level since August 2014 and then fell slightly in March and April.

Still, the business and consumer outlook remains relatively bright and businesses are still hoping the Trump administration delivers on promises that will spur the economy, including cuts to corporate taxes.

"With the expected actions by the administration to stimulate economic growth and with our continued progress in product and process innovation, we remain very optimistic for increased demand in the steel industry in the future," Roger Newport, chief executive of West Chester, Ohio-based AK Steel Corp., told investors last week.

Write to Jeffrey Sparshott at jeffrey.sparshott@wsj.com

(END) Dow Jones Newswires

May 01, 2017 13:07 ET (17:07 GMT)