April US manufacturing PMI release indicates a slight slowdown in business activity

The latest S&P Global Purchasing Managers’ Index (PMI) release for April indicates a slight slowdown in overall business activity in the U.S., with the composite PMI dropping to 51.2 from 53.5 in March. The Purchasing Managers' Index is a helpful economic indicator that reflects the health of the manufacturing and service sectors, with readings above 50 indicating expansion and below 50 suggesting contraction. Today’s data fell short of market expectations but still pointed to expanding activity. The decline from March’s reading is largely attributed to a weakening in the services sector, with future output expectations reaching their lowest since 2022. Despite this, manufacturing output showed some improvement, possibly due to ongoing effects of tariff-related activities. However, new orders in both manufacturing and services sectors have decreased and employment growth has slowed, though it remains positive (above 50).

Overall, this data offers a mixed picture. While the slowdown in services and declining future expectations might raise concerns, the resilience in manufacturing provides a silver lining. The rise in manufacturing prices suggests that tariffs are beginning to have a more pronounced impact, potentially leading to higher consumer prices in the coming months.

For investors, the near-term economic data will continue to be impacted by trade policy, which is shifting at a rapid pace. Recent announcements from the U.S. presidential administration, including potential reductions in tariffs on Chinese imports, have provided some relief to markets. This has led to a rally in U.S. stocks, as investors are hopeful for a de-escalation in trade tensions. The administration's softer stance on China and reassurances regarding the Federal Reserve have also contributed to this positive market sentiment. To the extent that trade tensions do in fact de-escalate, future expectations in both the manufacturing and services PMI could also see an improvement as sentiment rebounds.

All market and economic data as of 04/23/25 are sourced from Bloomberg Finance L.P. and FactSet unless otherwise stated.

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