ISM NMI remains on a positive growth track in March

The ISM’s index for measuring the sector’s overall health—known as the NMI—was 57.3 in March, 2.4 percentage points less than February’s 59.7. But despite the slight decrease, a reading above 50 represents growth.

By ·

The Institute for Supply Management’s (ISM) Non-Manufacturing Report on Business again showed positive growth for the 16th consecutive month.


The ISM’s index for measuring the sector’s overall health—known as the NMI—was 57.3 in March, 2.4 percentage points less than February’s 59.7. But despite the slight decrease, a reading above 50 represents growth.


The NMI’s total reading is largely based on four core metrics. In March, they all showed declines to a certain degree, with Business Activity/Production down 7.2 percent at 59.7, New Orders off 0.3 percent at 64.1, and Employment falling 1.9 percent to 53.7.


“It is still continued growth even if it has slowed down a bit,” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee, in an interview. “The composite was dragged down by the Business Activity index, but New Orders has not come down much. Some of this could have to do with cycle time, in terms of New Orders coming in and not immediately being part of the Business Activity mix, as that varies by industry and company.”


Even though the NMI is down, March’s reading is still very strong, especially when compared to March 2010, said Nieves and when compared to the growth rates of the previous two months.


And the 0.3 percent decline in New Orders essentially offsets the 7.2 percent drop in Business Activity/Production, given the strong overall reading, noted Nieves.


Japan situation: “In non-manufacturing, we are not going to see the impact of things from the situation in Japan, and Japan is importing many components it uses in manufacturing, while it does not manufacture as much as other countries in the Asia-Pacific,” said Nieves.


ISM survey respondents in the agriculture, forestry, fishing, and hunting sectors noted that while current business levels are steady, there is concern about high fuel costs and the speed of the Japanese recovery, which has a more direct impact on those sectors.


“What is happening in Japan will have a more direct impact on manufacturing than non-manufacturing,” said Nieves.


Looking at the NMI Prices, March Prices slipped 1.2 percent to 72.1, which Nieves said is still strong and more directly related to increasing fuel prices rather than high commodity prices, which are also up.


Fuel is particularly important to the distribution component of the non-manufacturing sector through over-the-road trucking and has a significant impact on the costs of goods sold for non-manufacturing operations.


“Increases in fuel and other petroleum-related products always result in price increases for things like plastics and other things,” said Nieves.


March Inventories were flat compared to February at 55.0 and Supplier Deliveries were down only 0.5 percent at 51.5. Nieves noted that Inventories actually grew from February but it occurred at the same rate. And with Inventories growing, he said Supplier Deliveries have not been impacted.


“What is interesting when looking at those numbers is that Backlog of Orders in March was up 4.0 percent from February at 56.0 percent,” said Nieves. “This leads me to believe that the current capacity levels can be supported at the moment.”


Looking at the overall growth for the first quarter of 2011, Nieves said the NMI has exceeded expectations, especially in January and February. Because of this he noted the “bar has been raised,” especially when compared to the first quarter of 2010.


For related stories click here.


About the Author

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. Contact Jeff Berman

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Latest Whitepaper
Supply Chain Visibility: Illuminating the Path to Responsive, Agile Operations
Supply chain visibility is not an end, but a tool. It is the means to achieving true supply chain effectiveness, agility and ultimately, corporate profitability.
Download Today!
From the December 2017 Logistics Management Magazine Issue
Trade and transport analysts see rates rising across all modes in accordance with continued expansion of domestic and international markets. Economists, meanwhile, say shippers can expect revenue growth in transport verticals to remain in the 3%-plus range.
2018 Customs & Regulations Update:10 observations on the “digital trade transformation”
Moore on Pricing: Freight settlement and your TMS
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
2018 Rate Forecast
Join our panel of top oil and transportation analysts for an exclusive look at where rates are headed and the issues driving those rate increases over the coming year.
Register Today!
EDITORS' PICKS
2018 Rate Outlook: Economic Expansion, Pushing Rates Skyward
Trade and transport analysts see rates rising across all modes in accordance with continued...
Building the NextGen Supply Chain: Keeping pace with the digital economy
Peerless Media’s 2017 Virtual Summit shows how creating a data-rich ecosystem can eliminate...

2017 NASSTRAC Shipper of the Year: Mallinckrodt; Mastering and managing complexity
An inside look at how a large pharmaceutical firm transformed its vendor and supplier relationships...
2017 Alliance Awards: Recognizing outstanding supply chain partnerships
In an era where effective supply chain collaboration is both highly valued and elusive, Logistics...