US March manufacturing rises, but commodity prices are a concern

01 April 2011 18:13  [Source: ICIS news]

WASHINGTON (ICIS)--The US manufacturing sector expanded in March for the 20th consecutive month, the Institute for Supply Management (ISM) said on Friday, but commodities prices escalated as well.

The institute said that its closely watched purchasing managers index (PMI) edged down slightly in March to 61.2% from the February reading of 61.4%, but last month also marked the third straight monthly index level above 60%.

The PMI is a composite of supplier responses to the institute’s monthly survey of 10 different business performance measures in 18 major manufacturing sectors.

A PMI reading above 50% indicates that the nation’s manufacturing sector is expanding, while an index measure below 50% means that production is contracting.

The index has been gaining more or less steadily since the US recession ended in June 2009, although it dipped in mid-2010 to the 55% range, indicating that while manufacturing was experiencing growth, the mid-year 2010 pace of expansion had slowed.

With the PMI now above the 60% level for three months, the institute said it indicates “strong sector performance in the first quarter”.

Among the 18 manufacturing industries tracked by the institute’s survey, 15 reported growth in March, including chemical products and plastics and rubber goods.

Other manufacturing sectors showing growth last month were transportation equipment, machinery production, textile mills, furniture and related products and food and beverages, which comprise important downstream consuming industries for chemicals and plastics.

However, ISM survey chairman Norbert Ore noted that while the manufacturing sector continued to expand last month, “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,” he said.

The institute reported price increases in such key raw materials as copper, corn, nickel, sugar, polyethylene, polypropylene and rubber, among others.

All 18 industries reported price increases for their feedstocks or raw materials in March, the report said.

In addition, one of the chemical manufacturing company executives who responded to the survey expressed concern about near-term commodity prices in the aftermath of the Japan earthquake and tsunami.

“What will be the impact to the US supply chain after the devastation cause by the Japan earthquake?” the unidentified executive wondered.

Raising further concerns about prospects for continued near-term expansion, the institute reported that while manufacturers' new orders saw growth in March, the pace had slowed by nearly five percentage points. Manufacturers' backlog of orders and exports also slowed last month, both down by 6.5 percentage points compared with February.

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
+1 713 525 2653

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly