U.S. ISM manufacturing index rebounds in March, suggest manufacturing activity remains in growth mode

The U.S. ISM manufacturing index rebounded in March. The index rose 1.1 points to 55.3, coming in above the consensus expectations of a roughly flat print. Three of the five subcomponents that comprise the headline index rebounded in the month. Employment led the way higher, rising sharply by 5.2 points to 57.5. New orders were up 1.9 points to 57.4, and production rose one point to 55.8. Inventories dropped 1.6 points to 51.8 and supplier deliveries fell 0.7 points to 54.2. These two were the only components of the headline index that slowed in the month.

After firming slightly in prior months, the trade components of the report softened in March. New export orders fell 1.1 points to 51.7, and import orders dropped 4.2 points, falling to 51.1 – the lowest level seen since January 2017.

Prices paid were up 4.9 points to 54.3, accelerating for the first time since last October. Large price moves are not unusual, given volatile commodity prices and the factor that the index is not seasonally adjusted, noted TD Economics in a research report.

Since November, reduced price pressures have shown declines in the price of aluminium and steel products and crude oil/gas. Out of 18 manufacturing industries, 16 recorded growth in March, unchanged from February. Apparel, leather, and allied products, and paper products were the only two industries that recorded a contraction in March.

The report released today implies that the manufacturing activity in the U.S. continues to be firmly in expansion mode, said TD Economics. Its resilience is remarkable given months of slumping manufacturing activity elsewhere. Even if activity has slowed down from last summer’s highs, the details in today’s report are supportive of ongoing health in the coming months. The recovery in new orders and production imply that February’s fall might have been because of temporary factors such as inclement weather.

However, survey respondents indicated towards weather as a factor that continued to hamper activity in March, especially in homebuilding and related industries.

“Aside from some concerns about Brexit and the progress of U.S. trade negotiations with China, the general mood of respondents remains optimistic. Although electronic component shortages are easing, a shortage of skilled labor has returned as a concern in some industries”, said TD Economics.

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