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ISM reports strong manufacturing output in March

By Jeff Berman, Group News Editor
April 02, 2012

United States-based manufacturing activity remains solid, according to the Institute for Supply Management’s (ISM) February Manufacturing Report on Business.

The PMI, the index used by the ISM to measure manufacturing activity, was 53.4 in March, which was 1 percent ahead of February’s 52.4. A reading of 50 or higher indicates growth is occurring. This was 0.7 percent below January’s 54.1, which was the highest PMI reading since June 2011. Economic activity in the manufacturing sector has expanded for 32 straight months and overall economic activity has expanded for 34 straight months.

New Orders, commonly referred to as the ‘engine’ which drives manufacturing, were down 0.4 percent at 54.5 in March, and Production was up 3.0 percent at 58.3. Employment was up 2.9 percent at 56.1. Each of these metrics were in the 50’s, pointing to continued positive growth.

‘I am just really delighted that we see the PMI in this range for the last quarter, with the last five months being in the range of 52-to-54,’’ said Bradley J. Holcomb, CPSM, CPSD, chair of the ISM Manufacturing Business Survey Committee, in an interview. “Last year at this time we were in the 60s for four months straight and that was an ‘overheated’ situation and not sustainable. What we are seeing here is consistent and steady and sustainable. I think our panel is looking forward to more of the same over the next few months.”

Looking at the PMI, New Orders and Production numbers, Holcomb said that each of these metrics has 15 of the 18 manufacturing sectors tracked by the ISM in a growth mode.

The biggest gains of the core metrics were Production and Employment up 3.0 percent and 2.9 percent, respectively.

The gain in Production carried some of the 1 percent gain in the PMI, whereas Employment is strong in anticipation of continuing New Orders and was reflected in comments made by ISM members in the report.

The comments cited strong and improving business conditions, noting robust activity with healthy export demand and strong raw materials pricing, according to a chemical products respondent. Others said purchase activity is up more than ten percent, sequential and annual earnings, and positive outlooks, noted other comments.

Supplier Deliveries at 48.0 in March were only down 1.0 percent, and Inventories at 50.0 saw a 0.5 percent gain.

“With Supplier Deliveries, we have now seen two consecutive months of faster deliveries,” said Holcomb. “This is following 31 consecutive months of slower deliveries. In the long term, this particular metric is one we like to see above 50 which represent slower deliveries. It is a little bit of an inverse metric. In the short term it shows that suppliers are ramping up their production and inventory to meet the anticipated demand of manufacturing for their raw materials….and are positive trends, strong order books and don’t want to get caught short.”

Inventories are likely to be below 50 overall as they are a source of investment, he said.

Prices at 61.0 saw a 0.5 percent dip from February. This marks the third month of slight gains in increases. This matches up with expectations of nearly 3 percent for the entire calendar year as outlined by the ISM’s Semiannual Forecast.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


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