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US Manufacturing Slows for Fifth Straight Month: ISM

Written by Laura Miller

Manufacturing activity in the US continued to slow during the month of March, as did general economic activity, according to the latest Manufacturing Report on Business from the Institute for Supply Management (ISM).

anaylsis3The ISM’s monthly PMI index declined for a fifth consecutive month, registering 46.3% in March. This was 1.4 points lower than the month prior and the lowest level recorded since May 2020. A reading above 50% suggests general expansion in the manufacturing sector, while a reading below 50% indicates general contraction.

With the ISM survey’s “panelists reporting softening new order rates over the previous 10 months, the March composite index reading reflects companies continuing to slow outputs to better match demand for the first half of 2023 and prepare for growth in the late summer/early fall period,” commented Timothy Fiore, chair of the ISM’s Manufacturing Business Survey Committee.

“New order rates remain sluggish as panelists become more concerned about when manufacturing growth will resume,” Fiore added. “Supply chains are now ready for growth, as panelists’ comments support reduced lead times for their more important purchases. Price instability remains, but future demand is uncertain as companies continue to work down overdue deliveries and backlogs.”

March’s 46.3% index reading indicates contraction in the overall economy for a fourth month after a 30-month period of expansion, as a manufacturing PMI above 48.7% over a period of time indicates growth, according to ISM.

All component indices tracked by ISM showed contraction during March: overall manufacturing, new orders, production, employment, supplier deliveries, inventories, customers’ inventories, prices, backlog of orders, new export orders, and imports.

“Lead times are still improving, but prices continue to face inflationary pressures,” commented one panelist from the machinery sector. “Prices of steel and steel products are going up some. Hydraulic components are still facing extended lead times. We are increasing inventory levels of imports due to global uncertainty from the ongoing war in Ukraine and threats from China.”

A panelist in the primary metals market commented that: “Overall, business continues to remain strong. We are still experiencing supply chain issues on several indirect supplies.”

By Laura Miller,

Laura Miller

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