ISM: Manufacturing jumps, inventories leap up

The Institute for Supply Management's latest monthly report shows another month of growth, fueled in part by an unusually big leap up in inventory levels.

Sean Murphy -- Supply Chain Management Review, 4/1/2010

A surge in inventories fueled a high growth rate in the manufacturing sector in March, ending the first quarter with a bang, according to the latest monthly report from the Institute for Supply Management (ISM).



According to Norbert Ore, chair of ISM's Manufacturing Business Survey Committee. The index the ISM uses to measure the sector, or PMI, hit 59.6 percent, up 3.1 points from February. This marks eight straight months of increase for the PMI, Ore said, placing the sector's overall health well into "growth" territory. Ore also said the current growth rate is the fastest since 2004.



Ore said the current PMI is impressive, considering the same index registered at 40.4, in contracting territory, at this time last year.



"That's a remarkable story of what's been happening over the past year," Ore said.



In addition, similar indices in Europe and other parts of the world also indicate growth, a sign, Ore said, that the recovery isn't just happening here at home.



"We have basically a reasonably good recovery in global manufacturing going," he said.



Ore said he expected to see the PMI going up, since the New Orders and Production indices got into the 60s in March, but what really surprised him, he said, was the Inventories index. After a 46-month period of liquidation, Ore said the index made a "most unusual" leap upward in March, going up 8 points to 55.3 percent.



"I think it's an indication that we really hit bottom in inventories," Ore said.



Not all the news was positive, but even the bad news, Ore said, wasn't all bad. Prices went up as much as inventories in March, rising eight points to 75 percent. Ore's report said that prices have remained above 50 percent, indicating growth, for the past nine months.



Still, Ore said the numbers are misleading, and not an indication of pending inflation. Many of the goods which have gone up in price the most, he said, were metals.



"I don't think it's a problem yet," he said.



The employment index dropped by a single point to 55.1 percent. Ore called that "noise in the data," and said it didn't mean that employment was about to take a dive. The index, he said, went up 6 points between January and February, and still remains in "growth" territory, despite losing a point in March.