MAPI: March Manufacturing Numbers Should Allay Fears

The March ISM report confirms that the fundamentals of manufacturing activity are positive,” noted Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance for Productivity and Innovation (MAPI). “The index of 53.7 in March is slightly better than 53.2 in February, and both are above the 50 percent level that separates growth from decline. Over the last 20 years, the ISM index has equaled or been higher than 53.7 only 39 percent of the time. Of particular importance in the March report is that the production index surged 7.7 points to 55.9, new orders growth accelerated, and the backlog indicator jumped sharply. These indicators tend to confirm the suspicion that weather probably played a major part in the flattening of manufacturing industrial production growth in the first quarter of 2014 compared to the fourth quarter of last year.

“The March ISM report should allay fears of an industrial slowdown,” Meckstroth added. “Manufacturing production is never smooth and we expect a strong rebound in production activity over the next three quarters. Now that economic policy uncertainty has receded because of a federal budget agreement, we expect business investment to accelerate both this year and next and be the principal driver of an accelerating growth rate in manufacturing. There is still some pent-up demand for motor vehicles, although the greatest opportunity is in the resurrection of the housing supply chain. Manufacturing production increased 2.2 percent in 2013 and MAPI forecasts 3.2 percent growth this year.”