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  The ISM Manufacturing Index Declined to 57.2 in March
Posted Under: Data Watch • ISM
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Implications: The ISM manufacturing survey hit the second highest reading in two-and-a-half years in March, coming in just shy of February's reading of 57.7.  The details behind March's very healthy reading of 57.2 suggest broad-based strength in the manufacturing sector, as seventeen of eighteen industries reported growth in March, with no industries reporting declines.  The two most forward looking measures – new orders and production – showed a slower pace of expansion in March, but all eighteen industries reported growth in new orders while seventeen of eighteen reported growth in production.  In other words, manufacturing activity continues to pick up steam and looks set to continue at a healthy pace in the months ahead.  The employment index surged in March, rising to 58.9 from 54.2 in February, showing the strongest monthly reading going back to mid-2011.  That said, manufacturing remains a small portion of total employment.  For a better picture of labor market health, we tend to focus on broader signals (initial claims, earnings growth, and consumer spending) which have shown constant strength in recent years despite some turbulent times for the manufacturing sector.  On the inflation front, the prices paid index rose to 70.5 from 68.0 in February, with more than twenty commodities rising in price.  No commodity prices were reported lower.  Any suggestion that rising prices are just a reflection of the rebound in oil prices misses the mark.  Rising economic activity, the lagged effect of loose monetary policy, is putting pressure on a wide variety of inputs, and putting pressure on the Fed not to fall behind the curve in raising rates that are too low for the current environment.  In other economic news this morning, construction spending rose 0.8% in February (+1.1% including revisions to prior months), led by a pickup in homebuilding and commercial power projects.

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Posted on Monday, April 3, 2017 @ 11:03 AM • Post Link Print this post Printer Friendly

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