Manufacturing and Service Sectors Gain in March

The survey of U.S. manufacturing firms by the Institute for Supply Management (ISM) showed the pace of expansion quickened in March (to 59.6 percent, from 56.5 percent in February). Readings over 50 percent indicate more firms said business was improving than said it was worsening.

"The manufacturing sector grew for the eighth consecutive month during March,” reported Norbert Ore, chair of ISM’s Manufacturing Business Survey Committee. “The rate of growth as indicated by the Purchasing Managers’ Index is the fastest since July 2004. Both new orders and production rose above 60 percent this month, closing the first quarter with significant momentum going forward... [S]igns for employment in the sector continue to improve...indicating that manufacturers are continuing to fill vacancies. The Inventories Index provided a surprise as it indicated growth for the first time following 46 months of liquidation – perhaps signaling manufacturers' willingness to increase inventories based on expected levels of activity." One item that Ore failed to highlight was that manufacturing input prices rose 8 percent in March.

Wood Products managed to eek out a gain in March, thanks mainly to a bump up in production. New orders (including export orders) and a backlog of orders put Paper Products in the "plus" column.

Service sector activity added to February's gains; the non-manufacturing index registered 55.4 (up 2.4 percentage points), reflecting growth for a fourth consecutive month. Two of the three service industries we track shared in that gain: Construction and Agriculture, Forestry, Fishing & Hunting. Real Estate lost ground in all categories except order backlogs.

Corrugated containers, packaging and paper were among the commodities up in price; construction labor was one commodity down in price.