PMI index dips in March, but stays on growth path

Unexpected drop to 51.3% disappoints analysts, stock market


Institute of Supply Management logo. Courtesy: ISMThe Institute for Supply Management’s monthly PMI report was a mixed bag for March. While manufacturing activity grew for the fourth straight month and the overall economy approached four years of sustained growth, the PMI Index for March was sharply lower.

The March PMI was 51.3%, 2.9 percentage points down from the February level of 54.2% and lower than industry analysts expected. The lower reading was reportedly one reason stocks slumped on April 1. The downturn was the first since October 2012, though the reading still points to growth in the manufacturing sector.

Bradley J. Holcomb, chairman of the Institute for Supply Management Manufacturing Business Survey Committee said the latest number is “indicating expansion in manufacturing for the fourth consecutive month, but at a slower rate. Both the New Orders and Production Indexes reflected growth in March compared to February, albeit at slower rates.”

The report quoted survey respondents as indicating growth and optimism, but with some tempering. Among the comments included with the PMI report:

  • “Beginning to feel the seasonal upswing in business. Energy and resin remain a concern.” (Food, Beverage & Tobacco Products)
  • “While the second half of 2013 looks promising, the first half is a mixed bag.” (Computer & Electronic Products)
  • “Things seem slightly better than last year, but still not great.” (Printing & Related Support Activities)
  • “Automotive is still very strong.” (Fabricated Metal Products)
  • “Post-election in the U.S., companies within the oil and gas sector are still waiting for signs of some regulatory certainty or stability.” (Petroleum & Coal Products)

A PMI above 42.2% indicates general growth in the overall economy, which meant March’s number were the 46th straight month of overall economic growth. “The past relationship between the PMI and the overall economy indicates that the average PMI for January through March (52.9%) corresponds to a 3.3% increase in real gross domestic product on an annualized basis,” Holcomb said. “In addition, if the PMI for March (51.3%) is annualized, it corresponds to a 2.8% increase in real GDP annually.”


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