US manufacturing activity fell back more than expected in April, although readings are still not far away from peak levels. According to the Institute of Supply Management (ISM) April survey, its Purchasing Managers Index recorded a reading of 57.3, down from March’s reading of 59.3 and less than the 58.5 expected. 60.8 has been the highest reading so far in this cycle.
According to ANZ Head of FX Research Daniel Been, the result was in line with declines in other surveys. It had little effect on financial markets and yields actually finished the day a little higher. 2 year yields edged up 1bp to 2.50% and 10 year yields added 2bps to 2.97%. The US dollar was up strongly against the euro, yen and especially sterling, but these movements were more likely to have flowed from the Trump Administration’s announcement regarding steel and aluminium tariffs.
PMI figures appear to lead US GDP figures by a few months despite a considerable error in any given month. The chart below shows US GDP on a “year on year” basis (and not the BEA annualised basis) against US GDP implied by monthly PMI figures.