March 2014 ISM Manufacturing Survey OK – Within Expectations

 

The ISM Manufacturing survey for March 2014 indicated marginal manufacturing expansion. The New Orders sub-index which historically correlates to the economy also improved.

The ISM Manufacturing survey index (PMI) improved marginally from 53.2 to 53.7 (50 separates manufacturing contraction and expansion). This was within expectations which were 51.5 to 54.7 (consensus 54.0).

This index had been in a general downtrend since mid 2011. This is the ninth month of expansion. The regional Fed manufacturing surveys were mostly indicating growth in March, and now the ISM indicates manufacturing shows expansion in March.

Relatively deep penetration of this index below 50 has normally resulted in a recession.

The noisy Backlog of Orders improved from 52.0 to 57.5 – showing growth. Backlog growth is an indicator of improving conditions; a number below 50 indicates contraction. Backlog accuracy does not have a high correlation against actual data.

Economic activity in the manufacturing sector expanded in March for the 10th consecutive month, and the overall economy grew for the 58th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

“The March PMI® registered 53.7 percent, an increase of 0.5 percentage point from February’s reading of 53.2 percent, indicating expansion in manufacturing for the 10th consecutive month. The New Orders Index registered 55.1 percent, an increase of 0.6 percentage point from February’s reading of 54.5 percent. The Production Index registered 55.9 percent, a substantial increase of 7.7 percentage points compared to February’s reading of 48.2 percent. Employment grew for the ninth consecutive month, but at a lower rate by 1.2 percentage points, registering 51.1 percent compared to February’s reading of 52.3 percent. 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.