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

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

Subscribe to Modern Materials Handling Magazine!

Subscribe today. It's FREE!
Find out what the world’s most innovative companies are doing to improve productivity in their plants and distribution centers.
Start your FREE subscription today!

Article Topics

Business · ISM · · All Topics
Latest Whitepaper
Hydrogen, the Future of Materials Handling
Large, successful organizations are integrating hydrogen fuel cell technology into their lift truck fleets and benefiting from lower operational costs, reduced emissions and improved reliability.
Download Today!
From the October 2016 Issue
Brownells’ new Iowa distribution center has taken touches—and miles—out of the order fulfillment process and increased throughput with near 100% accuracy.
System Report: Brownells new DC is flexible and responsive
Pallet Usage Report: Pallets Remain Critical in the Modern-Day Warehouse
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Pallets: Supporting Product, Processes and the Enterprise
The smallest leak in performance or cost can bring a lean, nimble and speedy supply chain to a halt. During this 30-minute webcast we'll examine how Modern's readers use pallets to keep the wheels turning as they maneuver a road filled with sharp edges and potholes.
Register Today!
Brownells: Designing for Efficiency and Growth
Brownells’ new Iowa distribution center has taken touches—and miles—out of the order...
Industry celebrates National Manufacturing Day
Fourth annual Manufacturing Day is a grassroots effort by U.S. manufacturers to improve the public...

American Eagle Outfitters’ omni-channel journey
The fashion retailer has used warehouse execution software and automation to create a true...
The data-driven lift truck
Now that manufacturers and distributors are using the data from their automated systems to drive...