Factory Gains Cool as Inflation in Raw Materials Picks Up

Meg Roussos/Bloomberg News

U.S. factories expanded at a slightly slower pace in March, and a measure of raw-material prices hit an almost seven-year high, as manufacturers struggled to keep up with demand, data from the Institute for Supply Management showed April 2.

Highlights of March ISM Manufacturing

• Factory index eased to 59.3 (estimated 59.7) from 60.8 month over month; readings above 50 indicate expansion.

• Measure of new orders fell to 61.9, the lowest since August, from 64.2.

• Prices-paid index rose for a fourth straight month to 78.1, the highest since April 2011, from 74.2; employment gauge declined to 57.3 from 59.7.

Key Takeaways

A measure of customer inventories dropped to the lowest since July 2011, and a gauge of backlogs held at an almost 14-year high.

Together, that indicates factories continue to have trouble keeping up with demand from consumers and businesses while paying ever-higher prices for raw materials.

Even so, the figures are consistent with expectations of further gains in manufacturing production in coming months, and the main index remains near the highest level since 2004.

While a measure of factory payrolls softened, the underlying details of the ISM report bode well for employment. The Labor Department’s March jobs report is due later this week.

Other Details

• ISM index of backlogs held at 59.8, the highest level since May 2004.

• Measure of production eased to 61 from 62.

• Export orders measure fell to 58.7 from 62.8.

• Supplier deliveries gauge cooled to 60.6 from 61.1.

With assistance from Chris Middleton