ISM: Growth in Manufacturing Output Moderates

By April 1, 2011Economy, Trade

The widely watched Purchasing Managers Index (PMI) released today by the Institute for Supply Management shows manufacturing output is expected to continue to increase, but probably at the relatively moderate rate of the last few months.

The March PMI index stood at 61.2, slightly lower than the February index value of 61.4. Any value over 50 indicates that more manufacturers are expecting an increase than a decrease, and the March index figure is consistent with the generally 6-8 percent annual rate of manufacturing increase, in current dollars, implied by a variety of statistical indicators.

While still portending an increase, the fact that the index declined slightly from February and stood only 0.4 points higher than January does not suggest an accelerating rate of manufacturing growth in the near term. This observation is consistent with the manufacturing employment data released today by Department of Labor, which show that manufacturing employment increased in March, but by a smaller amount than in January or February.

The new export orders data from the Institute for Supply Management bear watching, for that index slipped sharply to 56.0 from February’s figure of 62.5. The export index appears generally more volatile than the overall PMI index and has been subject to rather wide month-month swings, so one month is not necessarily indicative. If the index continues to show softness, however, this could indicate a slowdown is coming in exports. As exports have been the fastest-growing part of U.S. factory shipments, this would be a worrisome development.

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