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US Economy Still Growing But at Slower Pace

”Consumption, described as production and employment, continues to expand, with indications that labor and skill shortages are affecting production output,” said Timothy R. Fiore, Chair of the Institute for Supply Management.

Economic activity in the manufacturing sector expanded in March, and the overall economy grew for the 107th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report on Business.

However, the March PMI registered 59.3%, a decrease of 1.5 percentage points from the February reading of 60.8%.

”Consumption, described as production and employment, continues to expand, with indications that labor and skill shortages are affecting production output,” said Timothy R. Fiore, Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee: 

“Inputs, expressed as supplier deliveries, inventories and imports, were negatively impacted by weather conditions; Asian holidays; lead time extensions; steel and aluminum disruptions across many industries; supplier labor issues; and transportation difficulties due to driver and equipment shortages. Export orders remained strong, supported by a weaker U.S. currency.

The Prices Index is at its highest level since April 2011, when it registered 82.6%. In March, price increases occurred across 17 of 18 industry sectors. Demand remains robust, but the nation's employment resources and supply chains are still struggling to keep up."

Highlights from the report include:

  • The Production Index registered 61%, a 1 percentage point decrease compared to the February reading of 62%.
  • The New Orders Index registered 61.9%, a decrease of 2.3 percentage points from the February reading of 64.2%.
  • The Employment Index registered 57.3%, a decrease of 2.4 percentage points from the February reading of 59.7%.
  • The Supplier Deliveries Index registered  60.6%, a 0.5 percentage point decrease from the February reading of 61.1%.
  • The Inventories Index registered 55.5 %, a decrease of 1.2 percentage points from the February reading of 56.7%.
  • The Backlog of Orders Index continued a 14-month expansion with its highest reading since May 2004, when it registered 63%.

What Respondents are Saying

-- "Supply constraints, extended lead times, capacity constraints [and the like], particularly in the electronics components markets, continue to frustrate and drain needed resources, have delayed production schedules and, in some cases, caused missed or delayed sales opportunities." (Computer & Electronic Products)

-- "International demand is strong for our products in all regions. We are seeing constraints in multiple chemical supply chains due to increased global demand. We are concerned about the impact of tariff and trade wars on demand, but at this time, [there are] no signals that global demand is slowing." (Chemical Products)

-- "Production targets continue to be a struggle due to shortages of globally sourced components. Many subtier components are in short supply for multiple OEMs." (Transportation Equipment)

-- "In the U.S., we continue to struggle with finding carriers and drivers for shipments." (Food, Beverage & Tobacco Products)

-- "Much concern in the industry regarding the steel and aluminum tariffs recently [imposed]. This is causing panic buying, driving the near-term prices higher and [leading to] inventory shortages for non-contract customers." (Machinery)

--"Significant price increases in the steel commodity due to 232 [the tariffs]. The price increases will begin to impact our company's performance." (Primary Metals) 

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