ISM Manufacturing Index Jumps to 10-Month High

The Institute for Supply Management reported that the nation’s manufacturing sector expanded at its fastest pace in 10-months, the overall business conditions index rising from 53.4 in March to 54.8 in April, surpassing expectations by a wide margin as the important new orders component showed a healthy increase.

This marks the 33rd straight month of expansion for this index (where readings above and below 50 indicate expansion and contraction, respectively) and the better-than-expected result last month bucks the overall recent trend of disappointing reports for the U.S. economy.

New orders - a key leading indicator for the manufacturing sector - jumped from 54.5 in March to 58.2 in April and production was strong, up from 58.3 to 61.0, as the only negative in the report was a contraction in backlog orders, from 52.5 to 49.5. The employment index improved from 56.1 to 57.3, boding well for the important labor report on Friday, and prices paid were elevated, but stable at 61.0.

Particularly after yesterday’s dismal report on the manufacturing sector from the Dallas Fed, where business activity contracted for the first time in seven months, many were expected the broader ISM manufacturing index to be weaker, but, as has happened many times since the economic recovery began in mid-2009, U.S. manufacturing has proven to be surprisingly resilient.