The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) expanded for the first time since August. The composite index rose surprisingly well in this report, up from 49.5 in February to 51.8 in March. More importantly, new orders (up from 51.5 to 58.3) and production (up from 52.8 to 55.3) were both up sharply in March, with the demand figure at its highest level since November 2014. Exports (up from 46.5 to 52.0) also improved, shifting into positive territory in March for the first time this year. That was encouraging news, and it helps to illustrate the stabilization that we have seen in the manufacturing sector in recent data. To be fair, growth for manufacturers remains weaker-than-desired, with businesses continuing to cite a number of challenges for their firms. Yet, the sample comments tend to highlight the positive, noting activity picking up and sales improving.
Employment (down from 48.5 to 48.1) remained a hurdle, with hiring not recovering just yet from the improvements in new orders and production. Indeed, hiring has contracted in five of the past six months. With continued progress, however, we would expect for firms to begin to add to their workforces moving forward. Meanwhile, inventories (up from 45.0 to 47.0) contracted for the ninth straight month, albeit at a slower pace of decline in March. This also could provide a stimulative effect for growth in the coming months, as manufacturers will need to increase production to meet additional demand, with stockpiles quite low.