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Manufacturing Sees Fastest Growth In Six Years

Another encouraging economic report shows manufacturing is still leading U.S. industry from depths of recession.

A new economic report shows the manufacturing segment is at the forefront of the recession recovery with economic activity expanding in March for the eighth consecutive month.

The rate of growth is the fastest since July, 2004, with both new orders and production increasing above 60 percent and ending the first quarters with "significant momentum going forward," according to the March 2010 Manufacturing ISM Report on Business issued today by the Institute for Supply Management (ISM).

Increasing growth in new orders and production, as well as larger inventories are cited as the driving factors.

The additional good news is that manufacturers are back to hiring, with a 10 percent improvement in employment, and the Inventories Index indicates growth for the first time after 46 months of liquidation. This, says the report, may signal manufacturers' willingness to even increase inventories.

The manufacturing index rose to 59.6 in March from February's seasonally adjusted reading of 56.5 percent, states the report. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

The 17 manufacturing industries reporting growth in March include: Apparel, Leather & Allied Products; Textile Mills; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Transportation Equipment; Machinery; Computer & Electronic Products; Paper Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Nonmetallic Mineral Products; Fabricated Metal Products; Wood Products; Printing & Related Support Activities; Chemical Products; and Primary Metals. Plastics & Rubber Products is the only industry reporting contraction during March.

ISM's New Orders Index registered 61.5 percent in March, 2 percentage points higher than the seasonally adjusted 59.5 percent registered in February. This is the ninth consecutive month of growth in the New Orders Index.

ISM's Production Index registered 61.1 percent in March, an increase of 2.7 percentage points from the February reading of 58.4 percent (seasonally adjusted). An index above 51 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. This is the 10th consecutive month the Production Index has registered above 50 percent.

Thirteen of the 18 manufacturing industries reported growth in employment in March in the following order: Textile Mills; Apparel, Leather & Allied Products; Paper Products; Machinery; Miscellaneous Manufacturing; Printing & Related Support Activities; Nonmetallic Mineral Products; Primary Metals; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Chemical Products; Computer & Electronic Products; and Transportation Equipment. The two industries that reported decreases in employment during March are: Plastics & Rubber Products; and Fabricated Metal Products.

Manufacturers' inventories expanded in March following 46 months of contraction, as the Inventories Index registered 55.3 percent. The index is 8 percentage points higher than the seasonally adjusted February reading of 47.3 percent. An Inventories Index greater than 42.6 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' figures on overall manufacturing inventories (in chained 2000 dollars).

ISM's Backlog of Orders Index registered 58 percent in March, 3 percentage points lower than the 61 percent reported in February. Of the 84 percent of respondents who reported their backlog of orders, 30 percent reported greater backlogs, 14 percent reported smaller backlogs, and 56 percent reported no change from February.

ISM's New Export Orders Index registered 61.5 percent in March, 5 percentage points higher than the 56.5 percent reported in February. This is the ninth consecutive month of growth in the New Export Orders Index.

Imports of materials by manufacturers expanded in March as the Imports Index registered 57 percent, 1 percentage point higher than the 56 percent reported in February. This is the seventh consecutive month of growth in imports.

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