US: ISM Manufacturing Index Registers 22nd Consecutive Month of Expansion  

The March ISM manufacturing index registered 57.1, missing expectations of a 59.0 print. The index fell 1.5 percentage points from the February reading of 58.6.

New orders fell by 7.9 percentage points to 53.8, while new export orders fell by 3.9 percentage points to 53.2.

The backlog of orders sub-index came in at 60.0, falling 5.0 percentage points from February’s 65.0 print.

The production index decreased 4.0 percentage points to 54.5 while the employment index rose 3.4 percentage points to 56.3.

The supplier deliveries sub-index fell to 65.4 from 66.1 in February. The sub-index continues to reflect difficulties in improving delivery rates due to production issues related to the pandemic.

15 of 18 manufacturing industries reported growth in March. Growth was led by Apparel, Leather & Allied Products, Furniture & Related Products, Food, Beverage & Tobacco Products, and Electrical Equipment, Appliances & Components.

Key Implications

The song remains the same in March as the ISM Manufacturing report shows the continued expansion, despite ongoing struggles with supply chains. A bright spot is sustained employment growth helping to alleviate prior labor shortages. Indeed, the March payrolls gain of over 400k new positions along with an improving labor force participation rate confirm this is not just a manufacturing sector story.

Solid job growth in March and continued expansion in the manufacturing sector affirm that the American economy continues to rumble along, brushing off temporary setbacks. The emergence of the BA.2 variant is another risk to add to the radar but, like with prior strains, its effects will likely prove temporary yet again.

The risks to supply chains remain ever-present. The shock to energy prices following the start of the war in Ukraine is yet another inflationary shock global manufacturers are absorbing. Thus far, the knock-on effects on American manufacturers have been limited to input prices gains (rather than outright shortages). More pressing are concerns about the ongoing lockdowns and reported port delays in China that could again limit deliveries amid strong demand.