Manufacturers grow at slowest pace in April since Trump elected, ISM finds


Bloomberg News/Landov

A worker sews U.S. military uniforms in Queens, New York. Manufacturers are still growing, but at the slowest pace since President Donald Trump was elected.

The numbers: American manufacturers expanded in April at the slowest pace since President Trump was elected, reflecting a broad slowdown in a key segment of the economy that’s acting as a headwind on U.S. growth.

The Institute for Supply Management said its manufacturing index slipped to 52.8% last month from 55.3% in March. Economists surveyed by MarketWatch had forecast the index to total 54.7%.

Readings over 50% indicate more companies are expanding instead of shrinking, but the rate of growth is the weakest since October 2016. Trump was elected less than a month later.

What happened: The ISM’s new-orders index slid 5.7 points to 51.7%, hurt in part by declining demand for exports. That’s the weakest reading since August 2016.

Some businesses appeared taken aback by Trump’s threat last month to close the border with Mexico to stem a flow of Central American immigrants seeking to enter the U.S.

“[We are] closely watching the Mexico border situation as well as the tariff situation,” said an executive at company that makes transportation equipment.

The employment gauge, meanwhile, dropped 5.1 points to 52.4%, marking the second lowest reading in two and a half years.

Read: ADP private-sector job growth surges by 275,000 – but don’t get too excited

The ISM index is compiled from a survey of executives who order raw materials and other supplies for their companies. The gauge tends to rise or fall in tandem with the health of the economy

Big picture: Manufacturers aren’t growing as fast as they were last summer, but they are growing. The pace of expansion is likely to remain on the milder side, however, until U.S. and China resolve festering trade tensions and a weak global economy starts to improve.

Other parts of the economy are healthier, though, and that’s keeping the economy expanding at a steady clip. Gross domestic product increased 3.2% in the first quarter.

Read: Construction spending tumbles in March as housing takes it on the chin

What they are saying? “Business is steady. We expect business to grow throughout the second quarter, then level in the third and fourth quarter,” said an executive at a company that makes fabricated-metal parts.

“It’s not clear what prompted the renewed weakening in the survey after it had appeared to stabilize, but one month is not definitive,” said chief economist Ian Shepherdson of Pantheon Macroeconomics.

“For now, though, this report will feed into the narrative that GDP growth will be much slower in the second quarter than the first,” he said. “. Some correction seems inevitable, but remember that manufacturing accounts for only about 12% of GDP.”

Read: Americans say it’s easier to find a job now than at any time in the past 18 years

Market reaction: The Dow Jones Industrial Average

DJIA, +0.16%

and S&P 500

SPX, +0.08%

gave up a large chunk of early gains on Wednesday after the ISM report. The S&P is vying to end on a record high for the fourth straight day.

The 10-year Treasury yield

TMUBMUSD10Y, -0.97%

fell to 2.47%.

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