US manufacturing activity shrinks by most since November

US manufacturing activity shrank in April by the most in five months. This was driven by lean order books, and the repercussions from tariffs prompted the steepest output contraction since 2020. The institute for supply management's factory gauge pointed to a contraction. However, prices paid for raw materials accelerated slightly.

The latest data shows that the industrial sector has trouble getting off the ground due to US tariffs and overall trade policy uncertainties. Backlogs decreased more quickly, and orders declined for a third consecutive month. Both of those are indicators of weak demand.

Eleven industries expanded, led by apparel, petroleum, plastics and rubber, while six contracted. The report also showed the strategy of rushing in imports ahead of tariffs is drawing to a close.

Add WION as a Preferred Source

The ISM imports index declined at the fastest pace since the end of 2023. In addition to the headwinds posed by sluggish demand, producers are also contending with higher costs.

US factories struggle for traction

A measure of prices paid for materials increased to the highest level since June 2022 despite cheaper energy costs. Weak orders, slower production and declining backlogs help explain a third straight month of decreasing manufacturing employment. Manufacturing activity data clearly suggests stagflation at play.

Economists warn that the US may already be in recession, with uncertainty around Trump's tariffs weighing further on economic activity. The US economy contracted at the start of 2025, and hard data so far in this quarter suggests a recession reading is imminent.

(With inputs from the agencies)