US ISM falls back in April, new orders and employment weaken

A key gauge of factory sector conditions in the US retreated last month, as the pace of incoming orders and hiring slowed down, with executives from several sectors citing concerns around increased trade frictions on the border with Mexico.

The Institute of Supply Management's manufacturing sector Purchasing Managers' Index slipped from a reading of 55.3 for March to 52.8 in April, hitting its lowest level since October 2016.

Economists had penciled-in a reading of 55.0.

Output levels also weakened, with the corresponding sub-index falling from 55.8 to 52.3 with price pressures flatlining.

In parallel, export orders shrank, although order backlogs increased.

According to respondents from the Electrical Equipment space "there is growing concern about product flow throughout the southern US border."

Those concerns were echoed by purchasing managers in Computers&Electronic Products and Machinery, with the latter saying that tariffs and border issues with Mexico "were a potential threat".

"It's disappointing but not disastrous, because the levelling-off in China’s PMIs in recent months strongly suggests that the incremental downside risk in the the ISM from here is very limited. A rebound next month is more likely than a further dip," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.