Tempe, Arizona — Economic activity in the manufacturing sector expanded in March, and the overall economy grew for the 107th consecutive month, 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 PMI® registered 59.3 percent, a decrease of 1.5 percentage points from the February reading of 60.8 percent. The New Orders Index registered 61.9 percent, a decrease of 2.3 percentage points from the February reading of 64.2 percent. The Production Index registered 61 percent, a 1 percentage point decrease compared to the February reading of 62 percent. The Employment Index registered 57.3 percent, a decrease of 2.4 percentage points from the February reading of 59.7 percent. The Supplier Deliveries Index registered 60.6 percent, a 0.5 percentage point decrease from the February reading of 61.1 percent. The Inventories Index registered 55.5 percent, a decrease of 1.2 percentage points from the February reading of 56.7 percent. The Prices Index registered 78.1 percent in March, a 3.9 percentage point increase from the February reading of 74.2 percent, indicating higher raw materials prices for the 25th consecutive month. Comments from the panel reflect continued expanding business strength. Demand remains robust, with the New Orders Index at 60 or above for the 11th straight month, and the Customers’ Inventories Index at its lowest level since July 2011. The Backlog of Orders Index continued a 14-month expansion with its highest reading since May 2004, when it registered 63 percent. Consumption, described as production and employment, continues to expand, with indications that labor and skill shortages are affecting production output. Inputs, expressed as supplier deliveries, inventories and imports, were negatively impacted by weather conditions; Asian holidays; lead time extensions; steel and aluminum disruptions across many industries; supplier labor issues; and transportation difficulties due to driver and equipment shortages. Export orders remained strong, supported by a weaker U.S. currency. The Prices Index is at its highest level since April 2011, when it registered 82.6 percent. In March, price increases occurred across 17 of 18 industry sectors. Demand remains robust, but the nation’s employment resources and supply chains are still struggling to keep up.”

Of the 18 manufacturing industries, 17 reported growth in March, in the following order: Fabricated Metal Products; Plastics & Rubber Products; Computer & Electronic Products; Paper Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Transportation Equipment; Petroleum & Coal Products; Wood Products; Machinery; Chemical Products; Textile Mills; Electrical Equipment, Appliances & Components; Furniture & Related Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Primary Metals. The only industry reporting a decrease during the period is Apparel, Leather & Allied Products.

WHAT RESPONDENTS ARE SAYING…
  • “Supply constraints, extended lead times, capacity constraints [and the like], particularly in the electronics components markets, continue to frustrate and drain needed resources, have delayed production schedules and, in some cases, caused missed or delayed sales opportunities.” (Computer & Electronic Products)
  • “International demand is strong for our products in all regions. We are seeing constraints in multiple chemical supply chains due to increased global demand. We are concerned about the impact of tariff and trade wars on demand, but at this time, [there are] no signals that global demand is slowing.” (Chemical Products)
  • “Production targets continue to be a struggle due to shortages of globally sourced components. Many subtier components are in short supply for multiple OEMs.” (Transportation Equipment)
  • “In the U.S., we continue to struggle with finding carriers and drivers for shipments.” (Food, Beverage & Tobacco Products)
  • “Much concern in the industry regarding the steel and aluminum tariffs recently [imposed]. This is causing panic buying, driving the near-term prices higher and [leading to] inventory shortages for non-contract customers.” (Machinery)
  • “New tariffs are causing concern across the supply chain. Full impact will take a few weeks to reveal itself.” (Miscellaneous Manufacturing)
  • “Significant price increases in the steel commodity due to 232 [the tariffs]. The price increases will begin to impact our company’s performance.” (Primary Metals)
  • “Overall, incoming orders are picking up, and supplier pricing is increasing in some commodities.” (Textile Mills)
  • “Hiring continues to slowly increase from February into March and capital spending was allowed a small increase. Oil market conditions have improved and continue to stabilize.” (Petroleum & Coal Products)

MANUFACTURING AT A GLANCE
MARCH 2018

Index Series Index Mar Series Index Feb Percentage Point Change Direction Rate of Change Trend* (Months)
PMI® 59.3 60.8 -1.5 Growing Slower 19
New Orders 61.9 64.2 -2.3 Growing Slower 27
Production 61.0 62.0 -1.0 Growing Slower 19
Employment 57.3 59.7 -2.4 Growing Slower 18
Supplier Deliveries 60.6 61.1 -0.5 Slowing Slower 18
Inventories 55.5 56.7 -1.2 Growing Slower 3
Customers’ Inventories 42.0 43.7 -1.7 Too Low Faster 18
Prices 78.1 74.2 +3.9 Increasing Faster 25
Backlog of Orders 59.8 59.8 0.0 Growing Same 14
New Export Orders 58.7 62.8 -4.1 Growing Slower 25
Imports 59.7 60.5 -0.8 Growing Slower 14
OVERALL ECONOMY Growing Slower 107
Manufacturing Sector Growing Slower 19
Manufacturing ISM® Report On Business® data is seasonally adjusted for the New Orders, Production, Employment and Supplier Deliveries Indexes.
*Number of months moving in current direction.