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Economic activity expands as economy grows: ISM

April 9, 2019
The March PMI registered 55.3%, an increase of 1.1 percentage points from the February reading of 54.2%.

Economic activity in the manufacturing sector expanded in March, and the overall economy grew for the 119th consecutive month, the nation’s supply executives said in the latest ISM Manufacturing Report on Business.

“Comments from the panel reflect continued expanding business strength, supported by gains in new orders and employment,” said Timothy R. Fiore, chair of the ISM Business Survey. “Demand expansion continued, with the New Orders Index returning to the high 50s, the Customers’ Inventories Index improving but remaining too low, and the Backlog of Orders Index softening to marginal expansion levels.

“Consumption (production and employment) continued to expand and regained its footing with a combined 6.2-percentage point gain from the previous month’s levels, recovering most of February’s loss. Inputs—expressed as supplier deliveries, inventories and imports—were lower this month, primarily due to inventory consumption exceeding inputs, resulting in a combined 2.3-point decline in the Supplier Deliveries and Inventories indexes that contributed negatively to the PMI.”

The March PMI registered 55.3%, an increase of 1.1 percentage points from the February reading of 54.2%.

Other highlights from the report:

  • The New Orders Index registered 57.4%, compared to the February reading of 55.5%.
  • The Production Index registered 55.8%, compared to the February reading of 54.8%.
  • The Employment Index registered 57.5%, compared to the February reading of 52.3%.
  • The Supplier Deliveries Index registered 54.2%, compared to the February reading of 54.9%.
  • The Inventories Index registered 51.8%, compared to the February reading of 53.4%.
  • The Prices Index registered 54.3%, compared to the February reading of 49.4%, indicating a return of increasing raw materials prices after a two-month respite.

Also, exports continue to expand, but at marginal levels, and prices reversed two months of contraction by returning to a mid-50s level, ISM said.

Transportation equipment, machinery, primary metals and fabricated metal products were among 16 manufacturing industries reporting growth in March.

“The manufacturing sector continues to expand, demonstrated by improvements in the PMI three-month rolling average, which is consistent with overall manufacturing growth projections,” Fiore said.

Here are some selected comments from respondents:

  • “Customer orders remain strong.” (Textile Mills)
  • “The electronics industry seems to be slowly coming out of crisis mode. Lead times and costs have leveled out in some commodities, and dynamic random access memory (DRAM) prices are actually coming down.” (Computer & Electronic Products)
  • “Brexit continues to be a concern, despite the fact that our organization has already rolled out a plan to minimize its impact.” (Chemical Products)
  • “Business remains very strong amid rumors of a slowdown, but forecasts do not indicate this. Electronics are at tight capacity from manufacturers, with no [change] in the near future.” (Transportation Equipment)
  • “Strong customer orders continue.” (Food, Beverage & Tobacco Products)
  • “Current weather conditions causing significant delivery delays [and] diminishing our production capabilities.” (Machinery)
  • “Strong business momentum coming into January and early February has slowed to typical seasonal business conditions for our industry.” (Miscellaneous Manufacturing)
  • “General procurement levels remain strong based on demand. Backlog for domestic new and repaired equipment continues to grow. Production meeting customer delivery requirements is a challenge. Still experiencing a skills gap in hiring qualified shop personnel, machinists and mechanics.” (Fabricated Metal Products)
  • “Steel tariffs continue to put upward pressure on our input costs. The government shutdown delayed the process of gaining exemptions to the tariffs.” (Petroleum & Coal Products)
  • “Awaiting with anticipation the outcome of the US-China trade deal.” (Plastics and Rubber Products)
  • “Experienced a reduction in orders, with forecasted softness going into Q2.” (Primary Metals)
  • “Weather in the domestic market is constraining homebuilding across the nation — too wet in the south, severe winter in the north. Expectations are that homebuilding backlog is growing, and a surge of domestic business will come in May and June. Internationally, the Chinese trade war is still holding business back, but expectations are that in April or May, business will spring back materially as tariffs resolve.” (Wood Products)
  • “Skilled labor is still tough to find.” (Apparel, Leather & Allied Products)
  • “Steel in US remains strong, driving numerous product lines.” (Nonmetallic Mineral Products)
  • “Business is very strong and has been for over two years.” (Furniture & Related Products)

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