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Manufacturing Sector Slumps for Eight Straight Month

Economic activity in the manufacturing sector declined in March for the eighth consecutive month while the overall economy registered a slight increase after two months of decline according to the latest figures from the Manufacturing NAPM Report on Business. The March PMI rose slightly to 43.1%, above the consensus figure of 42.0, and over the breakeven point of 42.7.

Economic activity in the manufacturing sector declined in March for the eighth consecutive month while the overall economy registered a slight increase after two months of decline according to the latest figures from the Manufacturing NAPM Report on Business. The March PMI rose slightly to 43.1%, above the consensus figure of 42.0, and over the breakeven point of 42.7. Although the increase above 43% suggests that the economy is no longer contracting, the figures for the first quarter indicate a significant economic problems remain. Fed watchers will wait to see if the Federal Reserve takes the report as a sign of recovery although the Index has remained below 50 since August. 

According to Norbert J. Ore, C.P.M., chair of the National Association of Purchasing Management's Manufacturing Business Survey Committee and group director, strategic sourcing and procurement, Georgia-Pacific Corporation. "The manufacturing sector continued to contract in March. However, it is encouraging that prices are moderating and there is growth in new export orders. Other bright spots were Production and Backlog of Orders which, though still declining, slowed significantly in their rate of decline."

The production indices all rose in March though they all remain weak, indicating that the manufacturing sector is still contracting.  It also appears that the sector has undertaken a successful inventory correction. With both New Orders and Backlog of Orders still below 50%, there is no indication of a quick improvement in manufacturing activity, however. New Orders grew by 1.5%, reversing a six month decline. Backlog of Orders failed to grow for the eleventh consecutive month in March. The Production Index rose in 3.1% in March to 42.8 percent up from 39.7 percent in February. This is the fourth consecutive month, and sixth in the last eight months, that the index has been below the 50% mark. 

Among other sub-indexes, New Export Orders is the only one registering above 50 percent, breaking a five month decline for the sector. Only three of the twenty sub-industries in manufacturing reported growth: chemicals, instruments and photographic equipment and miscellaneous. 

Series March February
PMI 43.1 41.9
Production 42.8 39.7
New Orders 42.3 40.8
Backlog of Orders 43.5 37.0
Supplier Deliveries 48.3 51.3
Inventories 44.2 45.7
Employment 40.4 37.2
Prices Paid 49.9 58.1
New Export Orders 50.6 47.6
Imports 49.1 46.5

The next NAPM Report on Business will be released on May 1, 2001.

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Read the latest report from the National Association of Purchasing Management.

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