Key Manufacturing Index Grows For Second Consecutive Month

By John S. McClenahen Consistent with signals being sent by most other economic indicators, the Institute for Supply Management's (ISM) manufacturing index advanced to 55.6% in March. It is the second consecutive month that the closely watched index has been above the 50% growth/no-growth mark. In February the index, known as the PMI, was at 54.7%. In January, it was 49.9%. "The March report certainly validates the turnaround in manufacturing," says Norbert J. Ore, group director of strategic sourcing and procurement at Georgia-Pacific Corp. and chairperson of ISM's manufacturing business survey committee. "While the growth in new production slowed, new orders rose to a very loft level, in fact, reaching a level last seen in October 1986," he says. "It is encouraging that the rate of decline in employment is slowing and that a number of businesses indicated they are starting to hire." Some 15 of the 20 industries included in the PMI index reported growth in March. They are apparel; primary metals; textiles; instruments and photographic equipment; furniture; transportation and equipment; electronic components and equipment; glass, stone and aggregate; rubber and plastic products; fabricated metals; printing and publishing; wood and wood products; food; industrial and commercial equipment and computers; and a miscellaneous category that includes jewelry, toys, sporting goods and musical instruments. With low energy prices, low inventories, and low interest rates, first quarter 2002 U.S. economic growth was stronger than expected and bodes well for continuing growth in the current quarter, Ore observes. But he has some words of caution. "It now appears that energy prices are rising, we have reached the end of inventory liquidation, and interest rates will certainly rise," he states. "The capital investment tax credit will help, but ultimately consumers will need to re-establish themselves as the major driver," Ore says.

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