The US ISM manufacturing index fell to 59.3 in March, slightly below expectations (Nomura: 59.8, Consensus: 59.6), from 60.8 in February, which was the highest reading since May 2004, notes the research team at Nomura.

Key Quotes

“The March data point to firm activity expansion, with 17 of 18 industries reporting business growth. This is consistent with our optimistic outlook on the industrial sector in the near term.”

“The index subcomponents suggest elevated demand with a high level of backlogged orders and low customer inventories. The production index remained elevated at 61.0, while the new orders index moderated slightly to 61.9 from 64.2, still a solid reading. The index of backlogged orders remained at 59.8, well above expansionary territory.”

“Finally, the supplier deliveries index remained high at 60.6, suggesting suppliers are still struggling to meet elevated demand at factories. The combination of elevated backlog orders and decreasing customers’ inventories echoed overwhelming demand.”

“Input prices continued to rise at a quick pace, with the prices paid index jumping to 78.1 in March, from 74.2.”

“Although the core PPI for consumer goods has been steadily rising on a 12-month basis, core goods CPI has been in decline for some time. That said, continued increases in input costs could exert upward pressure on the PPI for intermediate goods.”

“In addition, foreign demand held up in the month, with the new exports orders index at 58.7, slightly lower than 62.8 in the prior month. The employment index remained elevated at 57.3, pointing to continued strength in manufacturing sector hiring.”