Manufacturing activity contracted again in March

ISM's manufacturing index registered 48.6%, indicating the U.S. manufacturing sector failed to grow for the second consecutive month.

By Staff -- Modern Materials Handling, 4/1/2008 6:37:00 AM

Economic activity in the manufacturing sector contracted in March, while the overall U.S. economy grew for the 77th consecutive month, according to a report released today by the Institute for Supply Management (ISM).

The ISM’s manufacturing index—known as the PMI—registered 48.6% in March, falling below 50% for the second consecutive month. A PMI of more than 50 represents expansion of the manufacturing sector, while a reading under 50 represents a contraction.

“This completes the weakest quarterly performance for the U.S. economy since Q2 of 2003,” says Norbert Ore, chair of the ISM manufacturing business survey committee. “Manufacturers’ order backlogs continue to erode as the New Orders Index failed to grow for the fourth consecutive month.”

And as orders are slowing, manufacturing costs are rising. Nearly 70% of ISM’s survey respondents report paying higher prices in March than they did in February. “High oil prices and material shortages are becoming a real challenge to deal with in day-to-day operations,” says one respondent in the paper products industry.

Strong demand for exports continues to be the one of the few bright spots for U.S. manufacturers, as export orders grew for the 64th consecutive month in March.