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March manufacturing output remains in a good spot, says ISM

By Jeff Berman, Group News Editor
April 01, 2013

While some of its key metrics saw sequential declines, manufacturing growth continues to head in the right direction, according to monthly Manufacturing Report on Business from the Institute for Supply Management (ISM).

The PMI, the index used by the ISM to measure manufacturing activity—51.3 in March—was 2.9 percent lower than February’s 54.2 which represents the highest PMI reading since June 2011s 55.8. A reading of 50 or higher indicates growth is occurring, and the PMI has now been over the 50 mark for the last four months. March’s PMI was in line with the 12-month average of 51.7.

And economic activity in the manufacturing sector had expanded for 34 straight months prior to contraction in June and overall economic activity has now expanded for 46 straight months, according to ISM.

New Orders, which are commonly referred to as the engine that drives manufacturing, fell 6.4 percent to 51.4 in March, and Production—at 52.2—dipped 5.4 percent to 52.2. Employment was the lone metric with a monthly gain, rising 1.6 percent to 54.2.

“Overall, I felt March’s data was still quite positive,” said Bradley J. Holcomb, CPSM, CPSD, chair of the ISM Manufacturing Business Survey Committee, in an interview. “People have to understand that 51.3 as a PMI still represents the fact that the market was better than it was in February, just not at the same type of rate. The rate was down, but there is still growth. The same goes for New Orders, Production, and Employment.”

The extent of the decline in New Orders—down 6.4—was significant but it came off a very strong February, Holcomb said. And for the first three months of the year on a cumulative basis, he explained that New Orders are on a very good path.

Looking at Production, Holcomb said that to a large extent it is viewed as a decision made by manufacturers to not get too ahead of themselves, with a healthy Backlog of Orders number, which was down 4.0 percent to 51.0 in March.

“This shows that there is plenty of work for manufacturers, but they may not have decided to do things like offer extra overtime or go gangbusters. Instead, it highlights the steady track they are on.”

Supplier Deliveries declined 2.0 percent to 49.4 in March, and Inventories also dropped 2.0 percent to 49.5. And Prices fell 7.0 percent to 54.5.

Holcomb said that was a bigger decline in Prices than anticipated, as the first three months of a calendar year often see price increases floated by suppliers.

“This is in line with that but also very controlled,” said Holcomb. “Inflation appears to be in check, too, based on our index.”

Looking at the overall state—or condition—of manufacturing points to decent trends, which are intact on a year-to-date basis in 2013 and further boosted by things like improving consumer confidence and housing- and auto-related facets of the economy, which also are key in manufacturing output. Wood products and furniture and plastic products and fabricated metals for autos, coupled with electrical equipment, appear to be leading the way, he said.

March Manufacturing Exports posted a very strong month at 56.0 for a 2.5 percent gain. Holcomb noted that when looking at New Orders and Exports collectively it suggests that domestic orders were softer, with export strength providing a way to balance things out.

“Between exports at 56.0 and imports at 54.0 (unchanged from February), it shows that the global economy is alive and well in a participating and meaningful way,” said Holcomb. 

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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