Manufacturing Sector Posts Strong Gains

Largest Month-Over-Month Since June 2009

Manufacturing UpdateA key manufacturing index showed improved economic activity for the 10th consecutive month, while also painting an optimistic forecast for the sector as the weather warms up. The Institute for Supply Management (ISM) said its manufacturing index rose to 53.7% in March, a 0.5% increase over February. ISM data showed 14 of 18 manufacturing industries reported expansion.

While many of the specific manufacturing components made modest gains, the ISM production index shot up by 7.7% in March following February’s contraction, the largest month-over-month gain since June of 2009. ISM’s new order index jumped by 0.6%, another increase compared to the month prior.

The ISM report matches data released by the Commerce Department yesterday that found factory orders increased by 1.6% in February, a better-than-expected rise. Shipments of new orders rose by 0.9%, the strongest increase since last summer. Analysts expect further gains in the coming months after severe weather this winter likely led to a slowdown in orders and manufacturing. Unsurprisingly, the Commerce Department reported that inventories grew by 0.7% in February, the biggest rise in nearly two-and-a-half years, as slowed consumption forced factories to warehouse more products.

The ISM index did show a decrease in employment, falling to 51.1% in March from 52.3% in February. Typically, though, employment lags behind shifts in production and demand, meaning companies could well add more manufacturing jobs as activity ramps up in the spring.