ISM: U.S. Manufacturing Slips In March, Non-Manufacturing Rises

A closely watched indicator of economic activity shows U.S. manufacturing slowing further in March, consistent with some economists' belief that the nation's overall economy was growing less rapidly as the first calendar quarter of 2005 came to an end.

Although the manufacturing sector of the economy continued to grow for the twenty-second month, the Institute for Supply Management's (ISM) manufacturing activity index slipped to 55.2% in March, one-tenth of a percentage point lower than February's 55.3%.

An index figure above 50% indicates that manufacturing generally is growing; a number below 50% signals the sector is contracting.

In March, new orders in manufacturing actually were 1.3 percentage points higher than in February at 57.1%. But production slowed by two-tenths of a percentage point to 56.5% in March and employment fell 4.1 percentage points to 53.3%.

Meanwhile, the non-manufacturing sector of the economy fared much better. ISM's business activity index for the sector rose 3.3 percentage points in March to 63.1% from 59.8% in February. New orders increased half a percentage point. The "backlog of orders also increased at a substantially faster rate than in February, indicating the likelihood of coordinated strong business activity in the months ahead," says Ralph G. Kauffman, the chair of ISM's non-manufacturing business survey committee and coordinator of the supply chain management program at the University of Houston-Downtown. The backlog rose a full 5 percentage points in March to 56.5%.

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