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March Manufacturing Index: Production, New Orders Decline (Plus Dr. Joe's Take)

Press release from the issuing company

- See Dr. Joe Webb’s take below April 2, 2003 -- (Tempe, Arizona) — Economic activity in the manufacturing sector failed to grow in March, while the overall economy grew for the 17th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business. The report was issued today by Norbert J. Ore, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee and group director, strategic sourcing and procurement, Georgia-Pacific Corporation. "The manufacturing sector failed to grow in March, marking the end of four consecutive months of growth. A turn in both New Orders and Production drove the change as New Orders fell below 50 percent after six months of growth, and Production fell below 50 percent for the first time in 16 months. March wasn't a good month for manufacturing, as the sector appears to have lost its momentum. Employment continues to be a problem as the index has now been below 50 percent for 30 months." ISM's Backlog of Orders Index indicates that order backlogs declined for the ninth consecutive month, while ISM's Supplier Deliveries Index reflects slower deliveries for the 15th consecutive month. Manufacturing employment continued to decline in March as the index remained below the breakeven point (an index of 50 percent) for the 30th consecutive month. ISM's Prices Index is above 50 percent as manufacturers experienced higher prices for the 13th consecutive month. New Export Orders grew in March for the 15th consecutive month. March's Imports Index grew for the fifth consecutive month. Comments from purchasing and supply executives focused on war, soft demand, energy availability, and escalating prices. The war appears to have slowed demand in a number of industries, including Chemicals, Electronics, and Industrial Equipment. Issues related to energy consume resources and compress margins. ISM's PMI declined to 46.2 percent in March, a decrease of 4.3 percentage points when compared to 50.5 in February. ISM's New Orders Index declined 6.1 percentage points from 52.3 percent in February to 46.2 percent in March. ISM's Production Index declined 9.1 percentage points from 55.4 percent in February to 46.3 percent in March. The ISM Employment Index is at 42.1 percent for March, a decrease of 0.7 percentage point when compared to the 42.8 percent reported in February. ISM's Supplier Deliveries Index registered 53.8 percent, 0.5 percentage point higher than February's 53.3 percent. ISM's Inventories Index declined to 42.3 percent from 43.8 percent in February. ISM's Customers' Inventories Index for March is at 42 percent, a decline of 4 percentage points compared to the February reading of 46 percent. ISM's Prices Index in March is 70 percent, an increase of 4.5 percentage points from February's 65.5 percent. ISM's Backlog of Orders Index declined 7.5 percentage points, registering 41.5 percent in March compared to 49 percent in February. ISM's New Export Orders Index registered 52 percent, down 3.5 percentage points from February's 55.5 percent. ISM's Imports Index declined from 55.4 percent in February to 52.5 percent in March. "Supply managers continue to be challenged by business conditions. The start of the war will begin to bring clarity to a difficult situation. In many ways, the threat of war was more intimidating than the actualization," said Ore. Of the 20 industries in the manufacturing sector, eight industries reported growth: Apparel; Instruments & Photographic Equipment; Printing & Publishing; Electronic Components & Equipment; Food; Miscellaneous*; Textiles; and Wood & Wood Products. "Natural Gas was the only commodity reported in short supply. Commodities reported up in price are: Acetic Acid, Alcohol, Aromatic Chemicals, Aromatic Hydrocarbons, Benzene, Caustic Soda, Chemicals, Corrugated, Crude Oil, Diesel Fuel, Energy, Ethylene, Freight, Fuel Surcharges, Gasoline, HDPE Resin, Heating Oil, Isopropyl Alcohol, LDPE Products, LDPE Resin, Methanol, Natural Gas, Natural Rubber, Nickel, Paper, Petroleum-based Products, Plastic, Plastic Containers, Plastic Resin, Polyester, Polyester Fiber, Polyethylene, Polyethylene Film, Polyethylene Resin, Polypropylene, PVC, Propylene, Propylene Glycol, Resin, Stainless Steel, Styrene, and Transportation. The only commodities reported down in price are Corrugated and Wheat," Ore stated. ----- From Dr. Joe Webb: “Following a negative report by the Chicago Purchasing Managers, the national report of the Institute for Supply Management was also negative, down 8.5%, to 46.2 -- reading of 49.5 was expected. This was the first negative reading since October 2001. One should never put full trust into one economic reading, but this continues a pattern of dour economic news of late, as measures that were mildly positive look like they are running out of gas. Strangely, printing and publishing was a sector that reported an increase in new orders. I suspect that if this dour reporting continues, sustained new orders will not hold up. The Fed may finally move to cut interest rates yet again, though I think it will have little effect.” See more analysis on this report and other recent news on Friday. Visit www.whattheythink.com