March 2014 ISM Reports

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According to the Institute for Supply Management’s (ISM) monthly opinion survey, expansion of economic activity in the U.S. manufacturing sector inched up again in March. The PMI registered 53.7 percent, an increase of 0.5 percentage point from February's 53.2 percent (50 percent is the breakpoint between contraction and expansion). ISM’s manufacturing survey represents under 10 percent of U.S. employment and about 20 percent of the overall economy. Expansion in the new- and backlogged-orders sub-indices suggest improving conditions; so, too, do continued growth in exports and imports. The new-orders sub-index correlates reasonably well to overall economic health.

“Several comments from the [respondent] panel reflect favorable demand and good business conditions,” said Bradley Holcomb, chair of ISM’s Manufacturing Business Survey Committee, but “with some lingering concerns about the particularly adverse weather conditions across the country.”

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Wood Products contracted in March, as increased export orders were overwhelmed by a drop in new orders and production. Paper Products grew, with widespread support among the sub-indices.

The non-manufacturing sector, which accounts for 80 percent of the economy and 90 percent of employment, recovered some of the ground lost in February. The NMI registered 53.1 percent, 1.5 percentage points higher than February’s 51.6 percent. Two sub-indexes in the NMI – the Business Activity Index and the New Orders Index – have good correlations to the economy. The Business Activity Index declined while the New Orders Index improved, but both remained in expansion territory.

“Despite the effects of weather on many of the respective businesses, the majority of respondents indicate that business conditions are improving,” said Anthony Nieves, chair of ISM’s Non-Manufacturing Business Survey Committee. “The respondents also project better business activity and economic conditions as weather conditions continue to improve.

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Among the individual service industries we track, Real Estate contracted on weak employment. Construction expanded on the strength of new orders, imports and employment. Increased new orders and imports also boosted activity in Ag & Forestry

Commodities up in price included diesel and gasoline, copier paper, paper products, lumber and wood. Commodities down in price included caustic soda and natural gas. No relevant commodities were in short supply.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.