U.S. Manufacturing Growth Slows in March

April 8, 2013

This past Monday, the Institute for Supply Management (ISM) released its March Report on Business® for the Manufacturing sector.  Domestic manufacturing continued to grow for a fourth consecutive month, but March saw that growth slow, with the Purchasing Managers Index (PMI™), slipping 2.9% to 51.3%.

The monthly assessment is based on ISM’s proprietary PMI™ calculations, as well as benchmarks for new orders, production, employment, prices, backlogs, and other metrics.  A reading above 50% indicates expansion in the overall manufacturing sector.

The Prices Index, the only report element to lose ground in February, fell 7 percentage points to 54.5%.  Among the remaining indices, March indicated growth compared to February, albeit at a slower rate.  New Orders and Production (51.4% and 52.2%, respectively) expanded, as did the Employment, Backlog, Exports, and Imports indices.

Of the 18 manufacturing industries surveyed by ISM, 14 reported growth in March, compared to 15 in February.  The three industries that contracted were Petroleum & Coal Products, Chemical Products, and Machinery.

Markit, meanwhile, released its own March U.S. Manufacturing PMI™ assessment on Monday.  The index inched up to 54.6% (from February’s 54.3%), and as with ISM, any result above 50% indicates growth.  The Q1 PMI averaged 54.9%, up from 52.6% in Q4 2012, and the strongest quarterly performance in two years.

As word of the PMI figures—which had been expected to either increase compared to February’s benchmarks or fall only slightly—reached domestic and international markets, reactions were mixed.  The S&P 500 Index fell, while the Dow Jones Industrial Average remained relatively unchanged (-5.69 points, -0.1%).

“These trends are also consistent with the Philadelphia Federal Reserve Bank’s Business Outlook Report for March, said DVIRC Vice President, Marketing and Business Development, Mark Basla. “New orders increased in March, indicating the first positive reading in three months, and nearly 50% of respondents indicated an increase in six months.”

Reuters reported that stronger domestic demand helped China’s factory activity to rebound in March, with the official China manufacturing PMI climbing to an 11-month high of 50.9% for the month—just behind the domestic index rating. This result suggests that the speed of recovery in the world’s number two economy may be unsteady. Most analysts expect China’s economy to see a steady but slow recovery this year, driven internally by infrastructure investment and household consumption.  Growth in China struck 13-year lows in 2012 due to falling demand for its exports.