Economic activity in the manufacturing sector grew in March, with the overall economy notching a 10th consecutive month of growth, according to the March 2021 Manufacturing ISM Report on Business from the Institute for Supply Management.
“The March Manufacturing PMI registered 64.7 percent, an increase of 3.9 percentage points from the February reading of 60.8 percent. This figure indicates expansion in the overall economy for the 10th month in a row after contraction in April,” Timothy R. Fiore, CPSM, CPM, chair of the Institute for Supply Management manufacturing business survey committee, said. “The New Orders Index registered 68%, up 3.2 percentage points from the February reading of 64.8%. The Production Index registered 68.1%, an increase of 4.9 percentage points compared to the February reading of 63.2%. The Backlog of Orders Index registered 67.5%, 3.5 percentage points above the February reading of 64%. The Employment Index registered 59.6%, 5.2 percentage points higher than the February reading of 54.4%. The Supplier Deliveries Index registered 76.6%, up 4.6 percentage points from the February figure of 72%. The Inventories Index registered 50.8%, 1.1 percentage points higher than the February reading of 49.7%. The Prices Index registered 85.6%, down 0.4 percentage point compared to the February reading of 86%. The New Export Orders Index registered 54.5%, a decrease of 2.7 percentage points compared to the February reading of 57.2%. The Imports Index registered 56.7%, a 0.6-percentage point increase from the February reading of 56.1%.
“The manufacturing economy continued its recovery in March. However, survey committee members reported that their companies and suppliers continue to struggle to meet increasing rates of demand due to coronavirus (COVID-19) impacts limiting availability of parts and materials. Extended lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are affecting all segments of the manufacturing economy. Worker absenteeism, short-term shutdowns due to part shortages and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential. Optimistic panel sentiment increased, with eight positive comments for every cautious comment compared to a 5-to-1 ratio in February.
“Demand expanded, with the (1) New Orders Index growing at a strong level, supported by the New Export Orders Index continuing to expand; (2) Customers’ Inventories Index at an all-time low; and (3) Backlog of Orders Index growing to an all-time high. Consumption (measured by the Production and Employment indexes) contributed positively (a combined 10.1-percentage point increase) to the Manufacturing PMI calculation. All top six industries reported moderate to strong expansion. The Employment Index expanded for the fourth straight month, but panelists continue to note significant difficulties in attracting and retaining labor at their companies’ and suppliers’ facilities.
“Inputs — expressed as supplier deliveries, inventories and imports — continued to support input-driven constraints to production expansion at higher rates compared to February. Inputs positively contributed to the PMI calculation by a combined 5.7 percentage points. The importation of items marginally slowed in the period, driven by port backlogs. The Prices Index expanded for the 10th consecutive month, indicating continued supplier pricing power and scarcity of supply chain goods.
“All of the six biggest manufacturing industries — computer and electronic products; fabricated metal products; food, beverage and tobacco products; transportation equipment; chemical products; and petroleum and coal products, in that order — registered strong growth in March.
“Manufacturing performed well for the 10th straight month, with demand, consumption and inputs registering strong growth compared to February. Labor market difficulties at panelists’ companies and their suppliers persist. End-user lead times (for refilling customers’ inventories) are extending due to very high demand and output restrictions as supply chains continue to recover from COVID-19 impacts.”
Of the 18 manufacturing industries, 17 reported growth in March, including machinery, primary metals and transportation equipment. No industries reported contraction in March.
What Respondents Are Saying
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