Economic activity in the manufacturing sector expanded in March after contracting for 16 consecutive months, reported the nation’s supply executives in the latest Manufacturing ISM Report On Business.

Timothy R. Fiore, CPSM, C.P.M., chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee, issued the report. 

Fiore said the Manufacturing PMI registered 50.3 percent in March, up 2.5 percentage points from the 47.8 percent recorded in February. He said the overall economy continued to expand for the 47th month after one month of contraction in April 2020. A Manufacturing PMI above 42.5 percent over a period of time generally indicates an expansion of the overall economy.

  • The New Orders Index reportedly moved back into expansion territory at 51.4 percent, 2.2 percentage points higher than the 49.2 percent recorded in February. 
  • The March reading of the Production Index (54.6 percent) is 6.2 percentage points higher than February’s figure of 48.4 percent. 
  • The Prices Index registered 55.8 percent, up 3.3 percentage points compared to the reading of 52.5 percent in February. 
  • The Backlog of Orders Index registered 46.3 percent, the same reading as in February. 
  • The Employment Index registered 47.4 percent, up 1.5 percentage points from February’s figure of 45.9 percent.

“The Supplier Deliveries Index figure of 49.9 percent is 0.2 percentage point lower than the 50.1 percent recorded in February,” Fiore said. 

Supplier Deliveries is the only ISM Report On Business Index that was inverted. A reading above 50 percent indicates slower deliveries, typical when the economy improves and customer demand increases. The Inventories Index reportedly increased 2.9 percentage points to 48.2 percent following a reading of 45.3 percent in February.

“The New Export Orders Index reading of 51.6 percent is the same as registered in February. The Imports Index continued in expansion territory, registering 53 percent, the same figure as in February. Both Indexes repeated their highest readings since July 2022, when the New Export Orders Index registered 52.6 percent, and the Imports Index registered 54.4 percent,” Flore said.

Fiore continued, “The U.S. manufacturing sector moved into expansion for the first time since September 2022. Demand was positive, output strengthened and inputs remained accommodative.”

Demand improvement reflected the New Orders Index in expansion and fewer comments regarding ‘softening,’ New Export Orders Index expanding again, supported by panelists’ stronger optimism, the Backlog of Orders Index which remained in moderate contraction territory, the same as in February, Customers’ Inventories Index contracting for the fourth consecutive month, remaining at a level accommodative for future production.

Output, measured by the Production and Employment Indexes, surged in the month, with a combined 7.7 percentage point upward impact on the Manufacturing PMI calculation. Panelists’ companies notably increased their production levels month-over-month. Head count reductions continued in March, with sizable layoff activity reported. Inputs, defined as supplier deliveries, inventories, prices, and imports, continued to accommodate future demand growth and showed signs of stiffening.

The Supplier Deliveries Index dropped marginally, moving into ‘faster’ territory, and the Inventories Index improved but remained in slight contraction territory. The Prices Index moved upward in moderate expansion (or ‘increasing’) territory as commodity-driven costs remained unstable.

Of the six largest manufacturing industries, Fiore said four — Food, Beverage & Tobacco Products; Fabricated Metal Products; Chemical Products; and Transportation Equipment, which account for a combined 54 percent of manufacturing gross domestic product (GDP), registered growth in March.

“Demand remains at the early stages of recovery, with clear signs of improving conditions. Production execution surged compared to January and February as panelists’ companies reentered expansion. Suppliers continue to have capacity but are showing signs of struggling due largely to their raw material supply chains. Thirty percent of manufacturing GDP contracted in March, down from 40 percent in February. More importantly, the share of sector GDP registering a composite PMI calculation at or below 45 percent, a good barometer of overall manufacturing weakness, was 1 percent in March, the same as in February but categorically healthier than the 27 percent recorded in January. Among the top six industries by contribution to manufacturing GDP in March, none had a PMI at or below 45 percent,” said Fiore.

The nine manufacturing industries reporting growth in March in order are as follows:

  1. Textile Mills
  2. Nonmetallic Mineral Products
  3. Paper Products
  4. Petroleum & Coal Products
  5. Primary Metals
  6. Food, Beverage & Tobacco Products
  7. Fabricated Metal Products
  8. Chemical Products 
  9. Transportation Equipment. 

The six industries reporting contraction in March in order are as follows:

  1. Furniture & Related Products
  2. Plastics & Rubber Products
  3. Electrical Equipment, Appliances & Components
  4. Machinery
  5. Computer & Electronic Products
  6. Miscellaneous Manufacturing

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