US Economy
Two PMI surveys show US manufacturing strengthened in March
By Michael Hennigan, Finfacts founder and editor
Apr 1, 2014 - 4:43 PM

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PMI (purchasing managers' index) surveys published today by the Institute of Supply Management and Markit, a London-based financial information service, show that the US manufacturing sector strengthened in March.

Bradley J. Holcomb,  chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee said. "The March PMI registered 53.7%, an increase of 0.5 percentage point from February's reading of 53.2%, indicating expansion in manufacturing for the 10th consecutive month. The New Orders Index registered 55.1%, an increase of 0.6 percentage point from February's reading of 54.5%. The Production Index registered 55.9%, a substantial increase of 7.7 percentage points compared to February's reading of 48.2%. Employment grew for the ninth consecutive month, but at a lower rate by 1.2 percentage points, registering 51.1% compared to February's reading of 52.3%. Several comments from the panel reflect favorable demand and good business conditions, with some lingering concerns about the particularly adverse weather conditions across the country."

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

Markit said that March data indicated that the U.S. manufacturing sector remained on a solid growth footing, with output levels and new business volumes both rising sharply. The latest increase in new work was slower than in the previous month, but still the second-fastest since May 2010. Meanwhile, the rate of production growth was little-changed from the near three-year high recorded in February. Survey respondents commented on a combination of improving underlying demand and a catch-up effect following the weather-related slowdown seen earlier in the year.

Adjusted for seasonal influences, the final Markit U.S. Manufacturing PMI registered 55.5 in March,  unchanged from the earlier ‘flash’ reading. The PMI was down from 57.1 in the previous month, but nonetheless at its second-highest level since January 2013. The main factor behind the drop in the headline index since February was the suppliers’ delivery times component, and to a lesser extent the moderation in new order growth from February’s recent high. Stocks of purchases had a slightly more positive influence on the headline PMI during March, while output and employment growth were little-changed over the month.

A strong overall increase in manufacturing production levels during March was mainly linked to stronger domestic demand. Overall levels of new work rose sharply, but new orders from abroad continued to expand at a only marginal pace. Higher new order volumes contributed to an accumulation of unfinished work for the second month running, but the latest rise in backlogs was slower than February’s survey-record high.

Chris Williamson, Chief Economist at Markit said: “The fall in the composite Manufacturing PMI masks the ongoing resilience of output, new orders and employment growth, all of which continued to rise at historically strong rates in March. That’s because the PMI also includes a measure of supplier delivery times, which dragged the PMI down but only because deliveries were quicker as a result of improved weather.

“The survey indicates that factory output growth has picked up again after the weather-related disruptions seen at the start of the year, presenting policymakers with an encouraging picture of a healthy goods-producing sector that is generating jobs at the rate of 15-20,000 per month.

“With warehouse inventories falling, in many cases due to sales outstripping production, factories look set to continue to expand capacity in coming months, taking on more staff and boosting business investment.”

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