Manufacturing Expands in March

The government reported that manufacturing expanded in March, but at a slower pace than predicted and with less surge than previous months.

The Institute for Supply Management reported that manufacturing expanded in March but at a slower rate than previous months. Meanwhile February construction spending rose to a record level,  signaling continued strength in the overall economy despite some evidence of inflation.

According to the the report, manufacturing index registered 55.2 last month compared with 56.7 in February. Readings above 50 indicate the sector is expanding. The ISM said the sector's growth, characterized by strength in new orders to factories and in production, came despite concern among manufacturers about the prices for raw materials, particularly for energy and metals.

The government also reported that construction spending rose to a record level in February as home building hit an all-time high. Patrick Fearon, senior economist with A.G. Edwards & Sons Inc. in St. Louis, told the Associated Press that the data is "certainly consistent with an economy growing at a good pace, maybe something at or slightly above the long-term average ... but with inflationary pressure maybe starting to bubble up."

Despite the decline in the manufacturing index, analysts said it reflects continued strength in the sector, according to AP. After robust growth in February credited to relatively warm weather, the March reading appears to signal a return to a more normal rate of expansion, close to the average of 55.4 that the index has shows in the past 12 months.

The slowing pace of growth was reflected in several measures taken by ISM. A sub-index measuring new orders to manufacturers registered 58.4, down from 61.9 in February. Production was virtually unchanged, with a reading of 57.5 compared with 57.4 the previous month. ISM's measure of employment in the sector declined to 52.5 from 55.0.

Meanwhile, an index measuring prices jumped to 66.5 from 62.5 in February, a sign that costs to manufacturers are increasing more rapidly.

Of the 20 manufacturing sectors tracked by ISM, 15 reported growth. They include miscellaneous manufacturing, apparel, textiles, petroleum, industrial and commercial equipment and computers, printing and publishing, primary metals, transportation and equipment, wood and wood products, chemicals, electronic components and equipment, fabricated metals, instruments and photographic equipment, food and paper.

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