The Institute for Supply Management (ISM) this morning reported that its purchasing managers index (PMI) fell from 54.2 in February to 51.3 in March. The consensus estimate had called for a decline to 54.0. An index reading above 50 indicates expansion.
The good news is that the U.S. manufacturing sector posted its fourth consecutive month of expansion. The bad news is that the rate of expansion is slowing down.
The employment index rose from 52.6 in February to 54.2 in March and the prices index fell from 61.5 to 54.5, signalling that input prices are falling somewhat. New orders are continuing to grow, but at a slower pace, falling from 57.8 in February to 51.4 in March.
An earlier report from research firm Markit Economics showed U.S. PMI rose in March, from a reading of 54.3 in February to 54.6. Both reports showed rising employment, but the ISM report shows a sharp drop in new orders while the Markit report had new orders rising in March.
ISM noted that new orders decreased in March for two categories: Petroleum and Coal Products, and Primary Metals. A decline in energy demand and in demand for commodity metals could indicate that the admittedly slow expansion that we have seen could slow even more.
Share prices gave up early gains immediately after the ISM report was released. The S&P 500 is now down about 0.3 and the Nasdaq is down about 0.4%. The DJIA is roughly flat.
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