U.S. Manufacturing grew in March, but industry watchers worry over rising commodity prices

The Institute of Supply Management released its assessment of manufacturing activity in the U.S. for March on Friday, and while the manufacturing sector grew during the month, concerns are starting to grow over quickly-rising commodity prices.

According to the recently released report, economic activity in the manufacturing sector grew in March for the 20th consecutive month, with the overall economy also expanding for the 22nd straight month. Of the 18 different manufacturing industries surveyed, 15 reported an uptick in growth during the month.

Nonetheless, the March PMI, a gauge of manufacturing activity, came in at 61.2 percent, which signaled growth but was down 0.2 percentage point from February's 61.4 percent reading; a reading above 50 generally indicates the manufacturing economy is growing. Moreover, ISM's New Orders Index registered 63.3 percent in March, which represented a fall of 4.7 percentage points from February's 68 percent reading, but still indicated growth in the sector.

ISM's Production Index hit 69 percent in the month, jumping 2.7 percentage points from February's 66.3 percent reading; an index above 51 indicates growth. According to the report, March served as the 22nd consecutive month the Production Index has posted a growth rate.
Institute of Supply Management chair Norbert J. Ore said manufacturing grew in March, but that rising commodity prices are starting to worry some manufacturers.

"The recent trend of rapid growth in the manufacturing sector continued in March, as the PMI registered above 60 percent for the third consecutive month," Ore said. "The component indexes of the PMI remain at very positive levels and signal strong sector performance in the first quarter. While manufacturers are benefiting from strength in new orders and production, there is significant concern with regard to commodity prices. Many manufacturers indicate the prices they have to pay for inputs are rising, and there is concern about the impact of higher prices on their margins."

Machinery manufacturers as a whole reported solid growth during March and are concerned about quickly climbing commodity prices, especially in metals. One executive from a machinery manufacturer told the ISM that "steel and certain steel products [are] causing concern over price increases and availability." Also reporting an expansion during March, chemical products makers are similarly worried about supplies, though their concerns are mainly focused on the supply chain disruptions emanating from Japan.


"What will the impact of the U.S. supply chain after the devastation caused by the Japan earthquake?" asked an executive from the chemical products sector.