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Manufacturing Showing a Glimmer of Hope

A significant measure of manufacturing activity rose for the fourth straight month in April. This could mean that the sector is starting to stabilize, even though the index has been at contraction level for 15 consecutive months.gm1

According to the Tempe, AZ-based Institute for Supply Management (ISM), its manufacturing index climbed to 40.1 in April, a welcome increase over the 36.3 reported during March.  While it should be noted that a reading below 50 is a sign that manufacturing activity is down.  Economists had predicted a reading of 38.4 – so the manufacturing marker is performing slightly better than expected.  According to Norbert Ore, chair of the ISM’s survey committee, “The decline in the manufacturing sector continues to moderate.  This is definitely a good start for the second quarter.”

Although the index fell to a record low in December, it has risen every month in 2009.  It is gradually approaching 41.

“The index suggests we have come off the bottom but are still in recession,” according to John Silvia, chief economist at the Wachovia Economics Group.

One of the issues that may affect the index is the fallout of the Chapter 11 bankruptcy of Chrysler, which has closed all of its 22 U.S. plans for at least 60 days.  The fate of the company will affect a huge swath of suppliers since Chrysler buys 78 percent of its parts and services domestically.  General Motors will also idle 13 assembly plants in North America for at least nine weeks.

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