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U.S. Manufacturing Fails To Grow In March

Sector sees slight increase from February, but still affected by heavy cost pressures; economists say results confirm manufacturing recession.

TEMPE, Ariz. -- The manufacturing sector failed to grow in March, according to the Institute for Supply Management (ISM). The PMI registered below 50 for the second consecutive month.
“This completes the weakest quarterly performance for the U.S. economy since Q2 of 2003,” said Norbert J. Ore, chair of the ISM Manufacturing Business Survey Committee. “Manufacturers’ order backlogs continue to erode as the New Orders Index failed to grow for the fourth consecutive month. Additionally, manufacturers continue to experience heavy cost pressures, as the prices they pay are still rising even with slower overall demand. Some manufacturers are still benefiting from strong export demand and continue to see growth in export orders.”
For March, the PMI registered 48.6, up 0.3 percent from February, but still indicating contraction.
New orders dropped 2.6 percent to 46.5 percent. Production fell 2 percent to 48.7.
Employment rose 3.2 percent to 49.2.
Supplier deliveries continued to slow, with the index rising 3.5 percent to 53.6. Inventories contracted, with the index dropping 0.5 percent to 44.9. The Backlog of Orders Index rose 2.5 percent to 47.5.
At 83.5 percent, the Prices Index indicates manufacturers are paying higher prices compared to February.
New export orders were up 0.5 percent to 56.5, while imports fell 2.5 percent to 45.
“The March 2008 ISM index at 48.6 confirms that the manufacturing is in a recession that we believe started back in October 2007,” said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI. “Not only are manufacturing orders and production falling, but you have to go back to late 2005 to find as many purchasing managers reporting that the prices they are paying have increased. The combination of declining business activity and rising prices brings back the unpleasant memories of yesteryears’ stagflation. A recession is always bad news for manufacturers. 
“In this cycle, however, the large decline in the international value of the dollar has set off an export boom and, just as importantly, restrained imports,” he added. “The positive foreign trade situation, the fact that firms did not over-invest in capital during the expansion, and aggressive fiscal and monetary stimulus should keep the 2008 recession on the mild side for the industrial sector.”
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