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Institute for Supply Management reports manufacturing growth in March

Manufacturing activity remains on very strong footing, according to data released by the Institute for Supply Management.
By Jeff Berman, Group News Editor
April 04, 2011

In its March Manufacturing Report on Business, the Institute for Supply Management (ISM) reported that the index it uses to measure the manufacturing sector—known as the PMI—was 61.2%, a 0.2% decline from February’s 61.4. February matched the highest PMI level since May 2004.

Any reading 50 or higher represents economic growth, and March is the 22nd consecutive month economic growth has occurred, according to the report. But the 0.2% decline snaps a seventh straight month of month-over-month manufacturing growth.

“The recent trend of rapid growth in the manufacturing sector continued in March, as the PMI registered above 60% for the third consecutive month,” said Norbert J. Ore, chair of the ISM Manufacturing Business Survey Committee, in a statement.  “The component indexes of the PMI remain at very positive levels and signal strong sector performance in the first quarter. While manufacturers are benefiting from strength in new orders and production, there is significant concern with regard to commodity prices. Many manufacturers indicate the prices they have to pay for inputs are rising, and there is concern about the impact of higher prices on their margins.”

New Orders at 63.3 were down 4.7% from February, and Production at 69.0 was up 2.7%. Employment at 63.0 was down 1.5%. Inventories were down 1.4% at 47.4, and Customers’ Inventories at 39.5 were off by 0.5%. Backlog of orders was down 6.5% at 52.5, and Prices at 85.0% dropped 0.5%.

In an interview, Ore said that even with a 0.2% decline, the manufacturing sector is growing at a similar rate to where it has been the last few months.

“The remarkable thing is we have averaged over 60 for the entire first quarter, which indicates a strong amount of momentum,” said Ore. “The first quarter is usually not this strong. It is a very strong performance. If the rest of the economy was behaving like manufacturing, things would be very strong right now, especially in terms of job creation.

With New Orders down nearly 5%, Ore explained that February New Orders at 68.0 “were absolutely off the charts and had to come back to reality a bit. And Production has subsequently increased due to gains in New Orders, too.

Export growth, explained Ore, also plays a large factor in New Orders and Production data. February exports at 62.5 drove up that month’s New Orders data at 68.0, and exports were down 6.5% in March at 56.0, which was a steeper decline than March’s New Orders at 4.7%.

Despite the sequential decline, the current New Orders reading represents a very positive indication for the manufacturing sector going forward.

On the Employment front, even though March fell 1.5%, Ore explained that manufacturers are very willing to hire now where there is a need for it.

“They are filling lots of positions for supply chain jobs, which are picking up dramatically,” he said. “Some of those positions were cut back during the recession and are now being replaced.”

About the Author

image
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff joined the Supply Chain Group in 2005 and leads online and print news operations for these publications. In 2009, Jeff led Logistics Management to the Silver Medal of Folio’s Eddie Awards in the Best B2B Transportation/Travel Website category. 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. If you want to contact Jeff with a news tip or idea,
please send an e-mail to .(JavaScript must be enabled to view this email address).


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