US Manufacturing Expansion Continues in March
Activity in the US manufacturing sector continued to expand in March, as nearly every industry reported growth and none experienced a contraction, the Institute for Supply Management (ISM) said Monday.
The ISM purchasing managers index slipped 0.5% to 57.2 last month, just below the 57.7 percent seen in February, which was the highest reading since August 2014.
It was the 7th month runnnig of expansion, and just above the consensus estimate among economists, who expected a reading of 57.0.
Analysts see the increase as part of a global recovery.
Of the 18 industries surveyed, 17 reported growth and 1 was flat, ISM said.
In addition, all 18 industries reported increases in new orders.
“I can’t remember the last time that happened,” the Chairman of ISM’s business survey committee, told reporters.
“This month and last are a tough act to follow.”
The new orders component was nearly a full point below the prior month, but still strong at 64.5 percent.
Employment also continues to rise in the sector, jumping to the highest level since June 2011 at 58.9 from 54.2 in February, the sixth consecutive increase. ISM said 14 of the 18 industries reported increased employment.
He said the jump “certainly indicates a need for more employees to keep up with series of new orders.”
He also noted the comments from purchasing managers in some industries citing difficulty finding workers with certain skills, which “all suggest high levels of employment and appetite for increasing employment ranks.”
That is in line with the continued job creation in the economy which has averaged 209,000 over the past 3 months. The Labor Department is due to release the March employment report Friday.
Exports were another strong aspect of the manufacturing sector, as the new export orders index rose four points to 59%, for the 13th consecutive increase and the highest reading in more than 3 years.
Analysts see the increases as part of a worldwide recovery.
“The current manufacturing situation is neither a boom nor a quirk, but a global revival,” IHS Markit US economist said in a research note.
While the turnaround is still in the early stages, he said, “After languishing for a few years, the world has suddenly fallen in love with hard goods again, and factories are churning them out all around the globe.”
The 1 worrisome aspect of the ISM manufacturing report continues to be prices, which have been rising for 13 straight months, with the index up 2.5 pts to 70.5 in March.
It was the highest reading for prices since May 2011, and 16 of the 18 industries surveyed reported paying higher prices for raw materials, or 47%, while only 6% reported lower prices.
“It’s something to watch closely as we go forward,” he said. However, managers report that they are able to pass along higher prices to customers, that means pricing power aka growth.