(Tempe, Arizona) — Economic activity in the manufacturing sector grew in March for the 22nd consecutive month, while the overall economy grew for the 41st 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. "The manufacturing sector maintained its strength in March, finishing the first quarter in a relatively strong position. Growth in New Orders and Inventories helped offset lower index readings in Production, Supplier Deliveries and Employment. Price inflation continues to present a problem for manufacturers as the Prices Index gained significant momentum." TOP PERFORMING INDUSTRIES The 16 industries reporting growth in March — listed in order — are: Primary Metals; Textiles; Glass, Stone & Aggregate; Wood & Wood Products; Instruments & Photographic Equipment; Electronic Components & Equipment; Rubber & Plastic Products; Furniture; Miscellaneous*; Industrial & Commercial Equipment & Computers; Chemicals; Fabricated Metals; Transportation & Equipment; Printing & Publishing; Apparel; and Food. The industries reporting the same level of activity as last month are: Tobacco and Petroleum. Paper is the only industry reporting decreased activity during March. WHAT RESPONDENTS ARE SAYING... "The construction sector continues to expand. Business is slowly growing. The only significant concern is rising interest rates, which could restrain capital expenditures." "Business has increased significantly over the past two months. We may be overbooked within four to six weeks and will have to add staff and shop employees." "Steel suppliers are grudgingly giving back some price, but not without tough talk." "The wet weather has kept shipments at a below-average level for this time of the year. However, we expect a very healthy year once we get through this current period." "Business continues very strong in all product categories for the markets we serve. Our open order status is 2½ times what it was last year for the same timeframe." COMMODITIES REPORTED UP / DOWN IN PRICE, and IN SHORT SUPPLY Commodities Up in Price ABS Plastic; Aluminum (17); Caustic Soda (11); Chemicals (14); Copper (6); Corrugated Containers (14); Diesel Fuel (7); Energy (2); Freight (13); Fuel (2); Fuel Oil; Gasoline (2); HDPE; Machined Components; MRO Items; Natural Gas (32); Oil (2); Oil-Based Products; Paper (13); Petroleum-Based Products; Plastic Products (various forms) (14); Plastic Resin (2); Plastics (8); Polyethylene; Polypropylene; Propylene; Resins (8); Solvents; Stainless Steel (7); Steel* (18); Titanium; and Wood. Commodities Down in Price Steel*. Commodities in Short Supply Caustic Soda (2); Steel (15); and Steel Products (various forms). *Reported as both up and down in price. Note: The number of consecutive months the commodity is listed is indicated after each item. MARCH 2005 MANUFACTURING INDEX SUMMARIES PMI The PMI indicates that the manufacturing economy grew in March for the 22nd consecutive month. The PMI for March registered 55.2 percent, a decrease of 0.1 percentage point when compared to February's seasonally adjusted reading of 55.3 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. A PMI in excess of 42.7 percent, over a period of time, generally indicates an expansion of the overall economy. The March PMI indicates that both the overall economy and the manufacturing sector are growing. The past relationship between the PMI and the overall economy indicates that the average PMI for January through March (55.6 percent) corresponds to a 4.7 percent increase in gross domestic product (GDP) on an annual basis. In addition, if the PMI for March (55.2 percent) is annualized, it corresponds to a 4.5 percent increase in GDP annually. New Orders ISM's New Orders Index grew in March with a reading of 57.1 percent. The index is 1.3 percentage points higher than the seasonally adjusted 55.8 percent registered in February, and it is the 23rd consecutive month the index has exceeded 50 percent. A New Orders Index above 51.1 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars). Fifteen industries reported increases for the month of March: Primary Metals; Textiles; Miscellaneous*; Electronic Components & Equipment; Glass, Stone & Aggregate; Instruments & Photographic Equipment; Industrial & Commercial Equipment & Computers; Rubber & Plastic Products; Wood & Wood Products; Chemicals; Transportation & Equipment; Furniture; Fabricated Metals; Food; and Printing & Publishing. Production ISM's Production Index is 56.5 percent in March, 0.2 percentage point lower than the seasonally adjusted 56.7 percent reported in February. March is the 23rd consecutive month of growth in the index. An index above 50 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. Of the industries reporting in March, 14 registered growth: Glass, Stone & Aggregate; Textiles; Wood & Wood Products; Instruments & Photographic Equipment; Furniture; Electronic Components & Equipment; Chemicals; Miscellaneous*; Transportation & Equipment; Fabricated Metals; Rubber & Plastic Products; Primary Metals; Industrial & Commercial Equipment & Computers; and Printing & Publishing. Employment ISM's Employment Index grew for the 17th consecutive month, following a 37-month trend of contraction. The index registered 53.3 percent in March compared to 57.4 percent in February, a decrease of 4.1 percentage points. An Employment Index above 48.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. The 12 industries reporting growth in employment during March are: Apparel; Wood & Wood Products; Paper; Electronic Components & Equipment; Printing & Publishing; Furniture; Transportation & Equipment; Rubber & Plastic Products; Primary Metals; Fabricated Metals; Industrial & Commercial Equipment & Computers; and Food. Supplier Deliveries The delivery performance of suppliers to manufacturing organizations was slower for the 21st consecutive month in March. ISM's Supplier Deliveries Index for March registered 52.5 percent, a decrease of 1.4 percentage points compared to February's seasonally adjusted reading of 53.9 percent. A reading above 50 percent indicates slower deliveries. The eight industries reporting slower supplier deliveries in March are: Instruments & Photographic Equipment; Rubber & Plastic Products; Miscellaneous*; Chemicals; Primary Metals; Industrial & Commercial Equipment & Computers; Paper; and Food. NOTE: A list of commodities in short supply is available on page 2 of this report. Inventories Manufacturers' inventories rose in March following a one-month decline as ISM's Inventories Index registered 54.1 percent (seasonally adjusted), up 5.5 percentage points when compared to February's 48.6 percentage points. An Inventories Index greater than 42.3 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (in chained 2000 dollars). The 11 industries reporting higher inventories in March are: Furniture; Fabricated Metals; Printing & Publishing; Primary Metals; Wood & Wood Products; Electronic Components & Equipment; Food; Rubber & Plastic Products; Chemicals; Paper; and Industrial & Commercial Equipment & Computers. Customers' Inventories** The March Customers' Inventories Index is at 46 percent, 3.5 percentage points higher compared to 42.5 percent reported in February. Respondents indicate that their customers do not have sufficient inventories on hand (inventories are too low) at this time. This is the 46th consecutive month that the index has registered below 50 percent. Five industries reported higher customer inventories during March and they are: Paper; Furniture; Food; Electronic Components & Equipment; and Primary Metals. Prices** ISM's Prices Index indicates manufacturers continue to pay higher prices in March. This is the 37th consecutive month the index has registered higher prices. March's index is at 73 percent, 7.5 percentage points higher than February's reading of 65.5 percent. In March, 51 percent of supply executives reported paying higher prices and 5 percent reported paying lower prices, while 44 percent reported that prices were unchanged from the preceding month. A Prices Index above 47.1 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices. In March, 18 industries reported paying higher prices: Petroleum; Rubber & Plastic Products; Instruments & Photographic Equipment; Paper; Chemicals; Miscellaneous*; Printing & Publishing; Food; Apparel; Furniture; Industrial & Commercial Equipment & Computers; Primary Metals; Electronic Components & Equipment; Transportation & Equipment; Glass, Stone & Aggregate; Textiles; Fabricated Metals; and Wood & Wood Products. NOTE: A list of commodities up in price and down in price is available on page 2 of this report. Backlog of Orders** ISM's Backlog of Orders Index registered 56 percent, indicating manufacturers' backlogs in March are growing at a faster rate when compared to February. Of the 86 percent of respondents who report their backlog of orders, 29 percent reported greater backlogs, 17 percent reported smaller backlogs, and 54 percent reported no change from February. The 11 industries reporting an increase in order backlogs during the month are: Electronic Components & Equipment; Miscellaneous*; Apparel; Primary Metals; Wood & Wood Products; Industrial & Commercial Equipment & Computers; Rubber & Plastic Products; Instruments & Photographic Equipment; Chemicals; Transportation & Equipment; and Food. New Export Orders ISM's New Export Orders Index for March registered 55.4 percent, a decrease of 2 percentage points when compared to February's seasonally adjusted index of 57.4 percent. This is the 39th consecutive month of growth in export orders. The nine industries reporting growth in new export orders in March are: Miscellaneous*; Textiles; Rubber & Plastic Products; Instruments & Photographic Equipment; Electronic Components & Equipment; Industrial & Commercial Equipment & Computers; Primary Metals; Food; and Fabricated Metals. Imports Imports of materials by manufacturers grew during March as the Imports Index registered 58.9 percent. The index decreased 1.8 percentage points when compared to February's seasonally adjusted index of 60.7 percent, indicating a slightly slower rate of growth. The 14 industries reporting growth in import activity for March are: Textiles; Apparel; Furniture; Miscellaneous*; Printing & Publishing; Fabricated Metals; Food; Industrial & Commercial Equipment & Computers; Wood & Wood Products; Electronic Components & Equipment; Transportation & Equipment; Rubber & Plastic Products; Chemicals; and Instruments & Photographic Equipment. *Miscellaneous is a preponderance of jewelry, toys, sporting goods and musical instruments. **The Backlog of Orders, Prices and Customers' Inventories Indexes do not meet the accepted criteria for seasonal adjustments. Buying Policy Average commitment leadtime for Capital Expenditures declined 9 days to 103 days. Average leadtime for Production Materials declined 2 days to 46 days. Average leadtime for Maintenance, Repair and Operating (MRO) supplies declined 1 day to 21 days.