The US Purchasing Managers Index (PMI) for March was released late Monday by the Institute for Supply Management (ISM), and came at a level of 50.3, just above the key 50 mark that separates US manufacturing expansion from contraction.
The PMI had previously been in contraction territory for 16 straight months.
“The measure got to that level being up 2.5 percentage point from the 47.8 recorded in February.
The overall economy continued in expansion for the 47th month after one month of contraction in April 2020. The PMI tracks closely but not exactly with the overall US economy.
A Manufacturing PMI above 42.5, over a period of time, generally indicates an expansion of the overall economy, according to ISM.
The other PMI numbers we track were mixed but mostly positive.
That starts with the New Order Index, which moved back into expansion territory at 51.4, that being 2.2 percentage points higher than the 49.2 recorded in February, in a good sign for future US manufacturing activity.
The March Production Index, at 54.6, is big 6.2 percentage points higher than February’s figure of 48.4.
The Prices Index registered 55.8, up 3.3 percentage point compared to the reading in February, and again above the 50 mark.
That means companies saw a rise in the cost of components, materials and other inputs (below 50 = falling prices), as inflation concerns remain.
In negative news, the Backlog of Orders Index came in at 46.3, the same as was recorded in February. That means the order book of most companies is shrinking, with the level still well below the 50 mark.
The Supplier Deliveries Index figure of 49.9 was 0.2 percentage point lower than the 50.1 percent recorded in February, barely under the 50 mark.
Supplier Deliveries is the only ISM index that is inversed, with a reading of above 50 indicating slower deliveries, which is typical as the economy improves and customer demand increases - or the reverse.
The Inventories Index decreased 2.9 percentage points to 48.2 following a reading of 45.3 in February., with the score below 50 indicating inventory levels at companies are again decreasing.
Said Timothy Fiore, Chair of the Institute for Supply Management Manufacturing Business Survey Committee: “The US manufacturing sector moved into expansion for the first time since September 2022. Demand was positive, output strengthened and inputs remained accommodative. Demand improvement was reflected by the New Orders Index back in expansion and fewer comments regarding softening, and the New Export Orders Index expanding again, supported by panelists’ stronger optimism.”
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As always, the ISM report provides a graphic of the full PMI scores the last 12 months, which as can be seen indicates the measure has below the key 50 mark since November 2022, and it is now averaging just 47.5 over the past year.
US PMI Last 12 Months
Source: ISM
Of the 28 sectors tracked by ISM, nine manufacturing industries reporting growth in March. They are, in order: textile mills; nonmetallic mineral products; paper products; petroleum & coal products; primary metals; food, beverage & tobacco products; fabricated metal products; chemical products; and transportation equipment.
As always, there were some interesting comments from PMI survey respondents.
“Performance continues to defy projections of a downturn in activity. Demand remains strong, and the pipeline for orders is robust,” said one manager in the chemicals sector.
Added one respondent in the fabricated metals sector: “Business is still strong - we are meeting and exceeding our forecasts. So far, we’re not hearing anything negative with our customers as far as ongoing business is concerned. It’s the same for raw material suppliers, nothing negative.”
Finally, a manager in the wood products sector noted that “Business activity is up. Many manufacturers are anticipating better business in the second quarter and much better in the third quarter. They are reporting that second-quarter bookings are just starting to ramp up.”
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