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Rate of Growth in the ISM Manufacturing PMI Dramatically Slows

Manufacturing PMI growth slows. Economists expected acceleration.
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ISM Manufacturing PMI 2022-04

The ISM Report on Business for April shows a serious slowdown in the rate of growth except for prices.

Diffusion Index Notes

  • The ISM is a diffusion index and one with a survivor bias. 
  • A diffusion index measures direction but not magnitude. For example, a company adding 3 workers balances out a company firing 300 workers. The direction counts but the absolute number doesn't.
  • 50 is the cutoff between expansion and contraction. At 50 the measure shows an equal number of companies expanding and contracting for that measure.
  • Survivor bias means that companies out of business, in trouble, or struggling don't respond. 
  • ISM says "A New Orders Index above 52.9 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars)."


  • Employment, inventories, and imports are on the verge of contraction. In absolute terms they may be contacting already. With diffusion indexes it is difficult to say.
  • A whopping 84.6% of companies are still raising prices. This will; eventually curtail demand. I expect sooner rather than later.
  • New orders, production, new export orders, and backlog of order numbers are respectable but all headed the wrong way. Growth is slowing across, the board.  

Economists Expectations 

Curiously the Bloomberg Econoday consensus was for the Manufacturing PMI to accelerate to 58.0 from 57.1 in a range of 56.5 to 58.7.

Every economist was overly optimistic despite rate increases by the Fed and a stock market that's diving.

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I suspect we will see outright contraction within a few months at most. Contraction next month would not at all be surprising, at least to me.

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