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US Manufacturing Contracts Further as Tariffs Drive Costs and Layoffs

April saw the second consecutive month of shrinking factory activity, with rising input prices, job cuts, and strained supply chains linked to sweeping import tariffs.

Employees work at a bio plant factory of Hanmi Pharm in Pyeongtaek, South Korea, July 1, 2021. Picture taken July 1, 2021. REUTERS/Heo Ran/File Photo
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Data: Institute for Supply Management; Chart: Axios Visuals

Overview

  • The ISM manufacturing PMI fell to 48.7% in April, signaling contraction for a second straight month as production slowed.
  • Input prices surged to a two-year high of 69.8 on the ISM index, driven by tariffs on imported goods and supply chain disruptions.
  • Layoffs continued as companies sought to cut costs quickly, with weekly jobless claims rising to 241,000 by the end of April.
  • Manufacturers reported inventory stockpiling and longer delivery times as firms tried to preempt tariff impacts on imported materials.
  • Global effects are evident, with South Korea's manufacturing sector experiencing its steepest downturn in over two years due to reduced trade flows.