Economic activity in the manufacturing sector grew in March, with the overall economy notching a 10th consecutive month of growth, say the nation's supply executives in the latest Manufacturing ISM Report On Business.
The report was issued by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee:
“The March Manufacturing PMI registered 64.7 percent, an increase of 3.9 percentage points from the February reading of 60.8 percent. This figure indicates expansion in the overall economy for the 10th month in a row after contraction in April. The New Orders Index registered 68 percent, up 3.2 percentage points from the February reading of 64.8 percent. The Production Index registered 68.1 percent, an increase of 4.9 percentage points compared to the February reading of 63.2 percent. The Backlog of Orders Index registered 67.5 percent, 3.5 percentage points above the February reading of 64 percent. The Employment Index registered 59.6 percent, 5.2 percentage points higher than the February reading of 54.4 percent. The Supplier Deliveries Index registered 76.6 percent, up 4.6 percentage points from the February figure of 72 percent. The Inventories Index registered 50.8 percent, 1.1 percentage points higher than the February reading of 49.7 percent. The Prices Index registered 85.6 percent, down 0.4 percentage point compared to the February reading of 86 percent. The New Export Orders Index registered 54.5 percent, a decrease of 2.7 percentage points compared to the February reading of 57.2 percent. The Imports Index registered 56.7 percent, a 0.6-percentage point increase from the February reading of 56.1 percent.”
Fiore continued, “The manufacturing economy continued its recovery in March. However, Survey Committee Members reported that their companies and suppliers continue to struggle to meet increasing rates of demand due to coronavirus (COVID-19) impacts limiting availability of parts and materials. Extended lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are affecting all segments of the manufacturing economy. Worker absenteeism, short-term shutdowns due to part shortages, and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential. Optimistic panel sentiment increased, with eight positive comments for every cautious comment, compared to a 5-to-1 ratio in February. Demand expanded, with the (1) New Orders Index growing at a strong level, supported by the New Export Orders Index continuing to expand, (2) Customers’ Inventories Index at an all-time low and (3) Backlog of Orders Index growing to an all-time high. Consumption (measured by the Production and Employment indexes) contributed positively (a combined 10.1-percentage point increase) to the Manufacturing PMI calculation. All top six industries reported moderate to strong expansion. The Employment Index expanded for the fourth straight month, but panelists continue to note significant difficulties in attracting and retaining labor at their companies’ and suppliers’ facilities. Inputs — expressed as supplier deliveries, inventories, and imports — continued to support input-driven constraints to production expansion, at higher rates compared to February. Inputs positively contributed to the PMI calculation, by a combined 5.7 percentage points. The importation of items marginally slowed in the period, driven by port backlogs. The Prices Index expanded for the 10th consecutive month, indicating continued supplier pricing power and scarcity of supply chain goods.
“All of the six biggest manufacturing industries — Computer & Electronic Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Transportation Equipment; Chemical Products; and Petroleum & Coal Products, in that order — registered strong growth in March.
“Manufacturing performed well for the 10th straight month, with demand, consumption and inputs registering strong growth compared to February. Labor-market difficulties at panelists’ companies and their suppliers persist. End-user lead times (for refilling customers’ inventories) are extending due to very high demand and output restrictions as supply chains continue to recover from COVID-19 impacts,” said Fiore.
Of the 18 manufacturing industries, 17 reported growth in March, in the following order: Textile Mills; Electrical Equipment, Appliances & Components; Machinery; Computer & Electronic Products; Apparel, Leather & Allied Products; Furniture & Related Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Primary Metals; Plastics & Rubber Products; Paper Products; Transportation Equipment; Chemical Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Printing & Related Support Activities; and Petroleum & Coal Products. No industries reported contraction in March.