ISM Manufacturing Index: The Institute for Supply Management’s manufacturing index moved down 2.9% (m/m) to 46.3 for March 2023; this value is weaker than the forecast of 50. The new orders sub-index scored at 44.3. The reading pointed to a fifth straight month of contraction in factory activity, as companies continue to slow outputs to better match demand for the first half of 2023 and prepare for growth in the late summer/early fall period.

The ISM manufacturing index is based on surveys of 300 purchasing managers in 17 industries. The survey is a diffusion index calculated as a percent of responses. A value of 50 is neutral, while less than 50 denotes contracting manufacturing activity and greater than 50 denotes expanding activity.

Figure 1 breaks down the composite index and sub-indexes. The backlogs sub-index was 47.9 this month, while the inventories sub-index was 47.5.

The six manufacturing industries that reported growth in March — in the following order — are: Printing & Related Support Activities; Miscellaneous Manufacturing; Fabricated Metal Products; Petroleum & Coal Products; Primary Metals; and Machinery. The 12 industries reporting contraction in March, in the following order, are: Furniture & Related Products; Nonmetallic Mineral Products; Textile Mills; Plastics & Rubber Products; Paper Products; Wood Products; Food, Beverage & Tobacco Products; Apparel, Leather & Allied Products; Chemical Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; and Transportation Equipment.

“Lead times are still improving, but prices continue to face inflationary pressures. Prices of steel and steel products are going up some. Hydraulic components are still facing extended lead times. We are increasing inventory levels of imports due to global uncertainty from the ongoing war in Ukraine and threats from China.” [Machinery]

At Gerdau, we closely monitor the ISM manufacturing index since it is an excellent barometer of the present strength, as well as a window on the likely short-run future, of U.S. manufacturing.