Manufacturing Expands for Fourth Consecutive Month

Economic activity in the manufacturing sector expanded in March for the fourth consecutive month, and the overall economy grew for the 46th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

The report was issued this week by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management Manufacturing Business Survey Committee. The PMI registered 51.3 percent, a decrease of 2.9 percentage points from February’s reading of 54.2 percent, indicating expansion in manufacturing for the fourth consecutive month, but at a slower rate. The New Orders and Production Indexes reflected growth in March compared to February, albeit at slower rates, registering 51.4 and 52.2 percent, respectively. The Employment Index registered 54.2, an increase of 1.6 percentage points compared to February’s reading of 52.6 percent. The Prices Index decreased 7 percentage points to 54.5, and the list of commodities up in price reflected far fewer items than in February. In addition, the Backlog of Orders, Exports and Imports Indexes all grew in March.

Of the 18 manufacturing industries, 14 are reporting growth in March in the following order: Wood Products; Furniture & Related Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Paper Products; Apparel, Leather & Allied Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Computer & Electronic Products; Transportation Equipment; Printing & Related Support Activities; Primary Metals; and Food, Beverage & Tobacco Products. The three industries reporting contraction in March are: Petroleum & Coal Products; Chemical Products; and Machinery.

WHAT RESPONDENTS ARE SAYING

• “Beginning to feel the seasonal upswing in business — energy and resin remain a concern.” (Food, Beverage & Tobacco Products)
• “Medical reimbursements from insurance companies, particularly Medicare, are slowing.” (Miscellaneous Manufacturing)
• “While the second half of 2013 looks promising, the first half is a mixed bag.” (Computer & Electronic Products)
• “Things seem slightly better than last year, but still not great.” (Printing & Related Support Activities)
• “Automotive is still very strong.” (Fabricated Metal Products)
• “Post-election in the U.S. — companies within the oil and gas sector are still waiting for signs of some regulatory certainty or stability.” (Petroleum & Coal Products)
• “Reduced government spending in the defense sector lowers business output.” (Transportation Equipment)
• “Business is continuing to be brisk.” (Furniture & Related Products)
• “Market continues to be strong, and our production is exceeding plans at this time.” (Wood Products)
• “Sales are low, even adjusted for seasonal variation.” (Chemical Products)

A PMI in excess of 42.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the March PMI indicates growth for the 46th consecutive month in the overall economy and indicates expansion in the manufacturing sector for the fourth consecutive month. Holcomb states, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through March (52.9 percent) corresponds to a 3.3 percent increase in real gross domestic product on an annualized basis. In addition, if the PMI for March (51.3 percent) is annualized, it corresponds to a 2.8 percent increase in real GDP annually.”