TEMPE, Ariz. — Economic activity in the manufacturing sector expanded in March after contracting for 16 consecutive months, and the wood products sector showed some of the most positive gains, according to the latest Manufacturing ISM Report On Business.

The category, Furniture and Related Products, did not fair as well, however.

The report was issued April 1 by Timothy R. Fiore, CPSM, C.P.M., chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee:

"The Manufacturing PMI registered 50.3 percent in March, up 2.5 percentage points from the 47.8 percent recorded in February," he said. "The overall economy continued in expansion for the 47th month after one month of contraction in April 2020."

(A Manufacturing PMI above 42.5 percent, over a period of time, generally indicates an expansion of the overall economy.) 

In terms of wood, "Business activity is up," said on survey respondent working in the wood products sector. "Many manufacturers are anticipating better business in the second quarter and much better in the third quarter. They are reporting that second-quarter bookings are just starting to ramp up."

According to the report, wood products:

• Was one of 12 manufacturing industries that reported growth in new orders in March. The industries — in the following order -- are are: Nonmetallic Mineral Products; Paper Products; Primary Metals; Printing & Related Support Activities; Wood Products; Petroleum & Coal Products; Plastics & Rubber Products; Computer & Electronic Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Chemical Products; and Miscellaneous Manufacturing. 

Furniture was one of two industry sectors that did not report growth. The other industry was Transportation Equipment.

• Wood products was one of eight industries reporting lower inventories in March. They are — in the following order — Wood Products; ; Printing & Related Support Activities; Furniture & Related Products; Plastics & Rubber Products; Computer & Electronic Products; Miscellaneous Manufacturing; Transportation Equipment; and Machinery.
• Of 18 manufacturing industries, the three that reported growth in order backlogs in March are: Wood Products; Primary Metals; and Computer & Electronic Products. 

The 12 industries reporting lower backlogs in March — in the following order — are: Furniture & Related Products; Petroleum & Coal Products; Machinery; Paper Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Transportation Equipment; Miscellaneous Manufacturing; Plastics & Rubber Products; Chemical Products; and Food, Beverage & Tobacco Products.

• The eight industries reporting growth in new export orders in March — in the following order — are: Wood Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Transportation Equipment; Fabricated Metal Products; Chemical Products; Food, Beverage & Tobacco Products; and Machinery. 

The four industries reporting a decrease in new export orders in March are: Paper Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; and Computer & Electronic Products.

The overall economy
According to Fiore's ISM report, the New Orders Index moved back into expansion territory at 51.4 percent, 2.2 percentage points higher than the 49.2 percent recorded in February. The March reading of the Production Index (54.6 percent) is 6.2 percentage points higher than February's figure of 48.4 percent. The Prices Index registered 55.8 percent, up 3.3 percentage points compared to the reading of 52.5 percent in February. The Backlog of Orders Index registered 46.3 percent, the same reading as in February. The Employment Index registered 47.4 percent, up 1.5 percentage points from February's figure of 45.9 percent.

"The Supplier Deliveries Index figure of 49.9 percent is 0.2 percentage point lower than the 50.1 percent recorded in February. (Supplier Deliveries is the only ISM Report On Business index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Inventories Index increased 2.9 percentage points to 48.2 percent following a reading of 45.3 percent in February.

"The New Export Orders Index reading of 51.6 percent is the same reading as registered in February. The Imports Index continued in expansion territory, registering 53 percent, the same figure as in February. Both indexes repeated their highest readings since July 2022, when the New Export Orders Index registered 52.6 percent and the Imports Index registered 54.4 percent."

Fiore continues, "The U.S. manufacturing sector moved into expansion for the first time since September 2022. Demand was positive, output strengthened and inputs remained accommodative. Demand improvement was reflected by the (1) New Orders Index back in expansion and fewer comments regarding 'softening,' (2) New Export Orders Index expanding again, supported by panelists' stronger optimism (3) Backlog of Orders Index remaining in moderate contraction territory, the same as in February and (4) Customers' Inventories Index contracting for the fourth consecutive month, remaining at a level accommodative for future production. Output (measured by the Production and Employment indexes) surged, with a combined 7.7-percentage point upward impact on the Manufacturing PMI calculation. Panelists' companies notably increased their production levels month over month. Head-count reductions continued in March, with sizable layoff activity reported. Inputs — defined as supplier deliveries, inventories, prices and imports — continued to accommodate future demand growth and showed signs of stiffening. The Supplier Deliveries Index dropped marginally, moving into 'faster' territory, and the Inventories Index improved but remained in slight contraction territory. The Prices Index moved further upward in moderate expansion (or 'increasing') territory as commodity driven costs remain unstable.

"Of the six biggest manufacturing industries, four — Food, Beverage & Tobacco Products; Fabricated Metal Products; Chemical Products; and Transportation Equipment, which account for a combined 54 percent of manufacturing gross domestic product (GDP) — registered growth in March.

"Demand remains at the early stages of recovery, with clear signs of improving conditions. Production execution surged compared to January and February, as panelists' companies reenter expansion. Suppliers continue to have capacity but are showing signs of struggling, due in large part to their raw material supply chains. Thirty percent of manufacturing GDP contracted in March, down from 40 percent in February. More importantly, the share of sector GDP registering a composite PMI calculation at or below 45 percent — a good barometer of overall manufacturing weakness — was 1 percent in March, the same as in February, but categorically healthier than the 27 percent recorded in January. Among the top six industries by contribution to manufacturing GDP in March, none had a PMI at or below 45 percent," says Fiore.