Manufacturing Activity Strong Through Q1, Construction So-So
- The ISM Manufacturing Index for March eased to a still-strong 59.3 percent.
- Construction Spending was little changed in February, up by 0.1 percent.
U.S. manufacturing activity was strong through the first quarter of the year as shown by the ISM Manufacturing Index. The March index eased to a still-strong 59.3, down slightly from February’s 60.8. Anything above 50 is a positive number, indicating improving manufacturing conditions. The quarterly average of the ISM MF Index through the first quarter of 2018 was a solid 59.7, the best quarterly average since 2004. The production, new orders and employment sub-indexes were all strong. The prices sub-index was elevated at 78.1, indicating increasing pricing pressure. Anecdotal comments show strong demand for goods, some supply constraints due to limited availability of inputs and concern about tariffs. The recently imposed import tariffs on steel and aluminum induced “panic buying” in the machinery industry. Seventeen out of eighteen industries reported growth in March. The apparel industry reported decreased output in March. Based on today’s report we can say that the U.S. manufacturing sector is healthy, pricing pressure is growing and may be increased by new tariffs and hiring will continue.
The value of construction put in place was little changed in February, gaining 0.1 percent. The value of private residential construction put in place inched up by 0.1 percent in February, even though the value of new construction on both single and multifamily projects increased (new residential construction accounts for about two-thirds of the total value of private residential construction). Private nonresidential projects gained 1.5 percent in February. Total public construction decreased by 2.1 percent for the month. Over the previous 12 months, the total nominal value of U.S. construction put in place has increased by 3.0 percent, well off the double-digit gains from 2014-2015.
Market Reaction: U.S. equity markets opened with losses. The yield on 10-Year Treasury bonds is up to 2.75 percent. NYMEX crude oil is down to $63.55/barrel. Natural gas futures are down to $2.66/mmbtu.
For a PDF version of this report click here: ISM_MF_04022018.
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