The Institute for Supply Management (ISM) manufacturing purchasing managers index (PMI) came in at 49.0 in March, indicating contraction in U.S. manufacturing after marginal expansion in February. The latest reading was worse than the forecast of 49.5.
Here is an excerpt from the latest report:
Fiore continues, “In March, U.S. manufacturing activity slipped into contraction after expanding only marginally in February. The expansion in both February and January followed 26 consecutive months of contraction. Demand and output weakened while input strengthened further, a negative for economic growth. Indications that demand weakened include: the (1) New Orders Index falling further into contraction territory, (2) New Export Orders Index dropping into contraction, (3) Backlog of Orders Index contracting at a faster rate, and (4) Customers’ Inventories Index remaining in ‘too low’ territory. Output (measured by the Production and Employment indexes) also weakened. Factory output (production) contracted in March, indicating that panelists’ companies are revising production plans downward in the face of economic headwinds. The Employment Index moved deeper into contraction, as panelists’ companies continued to release workers. Companies continued to cite ‘attriting down’ as the best process, as opposed to layoffs. Inputs — defined as supplier deliveries, inventories, prices and imports — expanded. All four indexes indicated expansion, which is not a positive sign when demand is moving in the opposite direction. Inventories growth is a temporary move to avoid tariffs and will decline when such trade issues are resolved.
“Demand and production retreated and destaffing continued, as panelists’ companies responded to demand confusion. Prices growth accelerated due to tariffs, causing new order placement backlogs, supplier delivery slowdowns and manufacturing inventory growth. Forty-six percent of manufacturing gross domestic product (GDP) contracted in March, up from 24 percent in February. The share of manufacturing sector GDP registering a composite PMI® calculation at or below 45 percent (a good barometer of overall manufacturing weakness) was 7 percent in March, a 5-percentage point increase compared to the 2 percent reported in February. Of the six largest manufacturing industries, three (Petroleum & Coal Products; Computer & Electronic Products; and Transportation Equipment) expanded in March, one fewer than in February,” says Fiore.
