ISM reports manufacturing rebound in March, with PMI back to growth

For the first time in six months, manufacturing returned to definitive growth, according to the March edition of the Manufacturing Report on Business from the Institute for Supply Management (ISM).

ISM said that the PMI, its index used to measure growth, was 51.8 in March (a reading of 50 or higher indicates growth), which topped February’s 49.5 by 2.3 percent. From October through February, the PMI had seen sub-50 readings, with October marking the first month that the PMI was below 50 since November 2012. March’s PMI is 1.3 percent above the 12-month average of 50.5. ISM noted the over all economy has seen growth for 82 months in a row.

Including the PMI, three of the report’s key metrics were up in March. New orders, which are often cited as the engine that drives manufacturing, were up 2.3 percent, and production saw a 2.5 percent increase to 55.3. Employment was off slightly, falling 0.4 percent to 48.1.

ISM said that of the 18 manufacturing sectors contributing to the report, 12reported growth in March, including Printing & Related Support Activities; Furniture & Related Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Machinery; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Chemical Products; Paper Products; Primary Metals; and Computer & Electronic Products.

The majority of comments submitted to the report by ISM member respondents were more positive than negative, with the comments tending to reflect business attitude and confidence, as well as being forward looking.

A plastics and rubber products respondent said that the unemployment rate is low, which makes it hard to find workers, and a chemical products respondent noted that “business in telecom is booming.”  A furniture and related products respondent said that its business is still going strong.

Brad Holcomb, chair of the ISM Manufacturing Survey Business Committee, said in an interview that the PMI returning to growth is really good news.

“I have felt we were building to this, with the PMI bottoming in December at 48 and now it is showing up in the numbers as we have been trying to climb back since then,” he said. “This is also a reflection of pent up demand to some degree, with new orders up 6.8 percent, which is a healthy increase as new orders have grown over the last three months even though the PMI was down.”

Supplier deliveries in March slowed to 50.2 (a reading above 50 indicates contraction), up 0.5 percent from February’s 49.7, and inventories were up 2.0 percent to 49, which is still below true growth. And backlog of orders rose 2.5 percent to 51.0.

“The increase in inventories is a response to gains in new orders heading up, as companies don’t want to be left short on inventories or personnel,” he said.

The uptick in March reflects a stronger business environment for manufacturing, as reflected in positive customer comments in the report, and a healthy PMI, as well as prices rising 13.0 percent to 51.5, which reflects the direction of prices and not actual change, observed Holcomb.