Manufacturing moves into growth territory, according to ISM report

It seems that daffodils aren’t the only thing popping up this spring. The Institute for Supply Management’s Manufacturing Report on Business for March finally moved into the “growing” category after being stuck in the “contracting” section for several months. The report, issued today, shows a 2.3% uptick in the Purchasing Managers Index (PMI) from February’s 49.5% to 51.8% for March.

The New Orders Index took a big jump (6.8%) in March to 58.3% from February’s 51.5%. The Production Index was also up from 52.8% in February to 55.3% in March. The Order Backlog also jumped into the “growing” category, from 48.% in February to 51.0% in March—a nice 2.5% increase, which indicates that manufacturers will be busy through spring. While those numbers are showing a brighter outlook for manufacturing, the Employment Index dropped once again for the fourth consecutive month to 48.1%, down 0.4% from February’s 48.5%. Comments from several news outlets noted that while manufacturing continues to lose jobs, productivity remains relatively strong due to the increased use of automation, a trend that these commentators expect to continue.

The Supplier Deliveries Index ticked into the “slowing” category, up 0.5% to 50.2 for March from February’s 49.7. The Inventories Index remains in the “contracting” zone (47.0% for March from 45.0% in February) for the ninth consecutive month. Customers’ Inventories also continue to slow—49.0% in March from 47.0% in February, which means that customer inventories are “too low,” noted the ISM report.

The Price Index took a huge jump, up 13.0% in March to 51.5% from February’s 38.5%, something that might have manufacturers concerned. Exports jumped into the “growing” zone by 5.5%, from 46.4% in February to 52.0% in March. The Imports Index stayed in the contracting category, only up 0.5% to 49.5% in March.

Of the 18 manufacturing industries, 12 reported growth in March. Plastics & Rubber Products came in sixth on that list of growing industries. However, finding skilled workers remains a problem as noted by one respondent in the Plastics & Rubber industry: “Unemployment rate is low in our county, making it hard to find workers. We are understaffed and running lots of overtime.”

The April 1 report from the Bureau of Labor Statistics (BLS) shows that non-farm payroll employment was up by 215,000 in March, with the unemployment rate holding fairly steady at 5%, considered by economists to be “full employment.” However, the labor participation rate (the number of people working or actively looking for work) stands at 63%, which is considered too low and includes people who have quit looking for jobs.

The BLS reported that in the manufacturing sector labor productivity declined 0.7% in Q4 of 2015, while output rose 0.1%. Productivity declined 1.8% in durable goods manufacturing, and increased 0.3% in non-durable goods.

A comment on today’s reports from a Fox Business News reporter noted that more bartenders have been hired over the past decade than manufacturing personnel, telling us something about how the United States continues to move steadily toward a service economy.