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Economy in Brief

U.S. Manufacturing Activity Softened in March
by Kathleen Stephansen, CBE  April 1, 2022

• Economic activity in the manufacturing sector grew at a slower pace in March.

• New orders and production slowed but the employment index rose.

• Prices paid increased sharply.

The Institute for Supply Management (ISM) reported that its Composite Index of Manufacturing Sector Activity edged down to 57.1 in March from 58.6 in February. While still indicating expansion in the overall economy, the March reading is the lowest since September 2020. In March 2021, the index had reached 63.7. A level of 58.8 in March had been expected in the Action Economics Forecast Survey. During the last 15 years, there has been a 43% correlation between the composite index and the quarterly change in real GDP

The new orders index stood at 53.8, down from 61.7 in February and from a high of 67.4 in December 2020. Twenty-eight percent (NSA) of respondents reported higher new orders versus 45.3% a year earlier, while 11.4% reported a decline, up from 5.5% a year earlier. The production index declined to 54.5 in March from 58.5 in February and has been trending lower from its March 2021 high of 66.4. The supplier delivery series edged down last month to 65.4 from 66.1 in February, suggesting a quicker product delivery speed than in May 2021 when the index peaked at 76.6. The inventories index edged higher to 55.5 from 53.6 in February but remained below the October 2021 high of 56.4.

The employment index rose to 56.3 in March from 52.9 in February, reaching its highest level since March 2021, when it stood at 57.7. An increased 24.4% (NSA) of respondents reported more hiring versus 23.9% in March of last year, while 10.4% reported a decline in jobs, up from 7.2% twelve months earlier.

The prices paid index registered a sharp increase to 87.1 in March, up from 75.6 in February, though the index remains below the June 2021 high of 92.1. Seventy-five percent (NSA) of respondents reported higher prices versus 71.6% a year earlier, while a lessened 0.9% reported price declines.

In other ISM series not included in the composite, the order backlog figure dropped to 60.0 in March from the jump to 65.0 (NSA) in February. It remains well below the high of 70.6 in May 2021. The new export measure declined to 53.2 in March from 57.1 in February, when it reached its highest level in twelve months. The imports index dropped to 51.8, from February's 55.4 reading and up from an October 2021 low of 49.1.

The ISM figures are based on responses from over 400 manufacturing purchasing executives from 20 industries, which correspond to their contribution to GDP in 50 states. These data are diffusion indexes where a reading above 50 indicates expansion. The figures from the Institute for Supply Management can be found in Haver's USECON database; further detail is found in the SURVEYS database. The expectations number is available in Haver's AS1REPNA database.

ISM Mfg (SA) Mar Feb Jan Mar '21 2021 2020 2019
Composite Index 57.1 58.6 57.6 63.7 60.6 52.5 51.2
 New Orders 53.8 61.7 57.9 66.9 64.3 54.0 51.2
 Production 54.5 58.5 57.8 66.4 61.0 53.7 51.2
 Employment 56.3 52.9 54.5 57.7 52.8 44.3 50.9
 Supplier Deliveries 65.4 66.1 64.6 76.6 72.8 61.6 52.9
 Inventories 55.5 53.6 53.2 50.9 52.2 48.8 49.8
Prices Paid Index (NSA) 87.1 75.6 76.1 85.6 83.8 54.0 49.1
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