U.S. Manufacturing Expanded in March
Economic activity in the U.S. manufacturing sector expanded in March for the first time in six months, while the overall economy grew for the 82nd consecutive month, according to the latest Manufacturing ISM Report On Business.
Manufacturing registered growth in March for the first time since August 2015, as 12 of 18 industries reported sector growth, and 13 of 18 industries reported an increase in new orders in March.
Manufacturing expanded in March as the Purchasing Managers Index registered 51.8 percent, an increase of 2.3 percentage points from the February reading of 49.5 percent, indicating growth in manufacturing for the first time since August 2015 when the PMI registered 51.0 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
A PMI above 43.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the March PMI indicates growth for the 82nd consecutive month in the overall economy, while indicating growth in the manufacturing sector for the first time in the last six months. “The past relationship between the PMI and the overall economy indicates that the average PMI for January through March, 49.8 percent, corresponds to a 2.1 percent increase in real gross domestic product on an annualized basis,” said Bradley J. Holcomb, chair of the Institute for Supply Management Manufacturing Business Survey Committee. “If the PMI for March is annualized, it corresponds to a 2.7 percent increase in real GDP annually.”
The delivery performance of suppliers to manufacturing organizations was slower in March as the Supplier Deliveries Index registered 50.2 percent, which is 0.5 percentage point higher than the 49.7 percent reported for February. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.
The Inventories Index registered 47 percent in March, which is an increase of two percentage points when compared to the 45 percent reported for February, indicating raw materials inventories are contracting in March for the ninth consecutive month at a slower rate than in February.
The ISM Prices Index registered 51.5 percent in March, which is an increase of 13 percentage points when compared to the 38.5 percent reported for February, indicating an increase in raw materials for the first time since October 2014. In March, 16 percent of respondents reported paying higher prices, 13 percent reported paying lower prices, and 71 percent of supply executives reported paying the same prices as in February. A Prices Index above 52.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.
ISM’s New Export Orders Index registered 52 percent in March, which is an increase of 5.5 percentage points when compared to the February reading of 46.5 percent. This month’s reading indicates growth in new export orders and is the highest reading since December 2014 when the New Export Orders Index also registered 52 percent.
The seven industries reporting growth in new export orders in March are wood products, printing, chemical products, fabricated metal products, primary metals, and machinery.
ISM’s Imports Index registered 49.5 percent in March, which is 0.5 percentage point higher than the 49 percent reported in February, and indicates contraction in imports in March for the second consecutive month.