U.S. Manufacturing Index Falls To Nearly Two-Year Low In March

(RTTNews) - Manufacturing activity in the U.S. saw continued growth in the month of March, according to a report released by the Institute for Supply Management on Wednesday, although the pace of growth slowed by more than anticipated.

The ISM said its purchasing managers index dropped 1.4 points to 51.5 in March after edging down 0.6 points to 52.9 in February.

While a reading above 50 indicates continued growth in manufacturing activity, economists had expected the index to show a more modest drop to 52.5.

With the bigger than expected decrease, the manufacturing index fell for the fifth straight month, hitting its lowest level since May of 2013.

Bradley J. Holcomb, chair of the ISM Manufacturing Business Survey Committee, noted that 10 of the 18 manufacturing industries reported growth in March.

Holcomb said executives referred to continuing challenges from the West Coast port issue, lower oil prices, residual effects of the harsh winter, higher costs of healthcare premiums, and challenges associated with the stronger dollar on international business.

The drop by the headline manufacturing index was partly due to slower growth in new orders, as the new orders index edged down to 51.8 in March from 52.5 in February.

The employment index also fell to 50.0 in March from 51.4 in February, indicating that there was no change in manufacturing employment compared to the previous month.

On the other hand, the report showed a modest increase by the production index, which edged up to 53.8 in March from 53.7 in February.

The prices index also climbed to 39.0 in March from 35.0 in February, although the reading below 50 pointed to a decrease in raw materials prices for the fifth consecutive month.

Peter Boockvar, managing director at the Lindsey Group, said, "Say what you will, the U.S. economy has dramatically slowed in Q1."

"We hope though we'll see a repeat of last year in that Q2 and Q3 rebound, but if not, it has obvious implications for Fed policy," he added.

Next Monday, the ISM is scheduled to release a separate report on activity in the service sector in the month of March.