Stat of the Day: Inventories Finally Growing

The March ISM easily beat consensus estimates of 57 because of surging inventories. The index came in at 59.6 versus 56.5 in February. The index was at its highest level since July 2004, but the most amazing number is that for the first time in 46 months inventories were actually built. With a reading of 55.1, manufacturers finally quit the liquidation process. So not only does the economy benefit from growth but also the rebuilding of the very depleted inventory stockpiles. Remember that for all the noise about the inventory benefits to Q1 GDP that was just because the quirky nature of the report where a smaller drop is beneficial.

With the employment index slipping slightly to from 56 to 55 and remaining below the overall index that should signal bullish corporate profits in Q1 and likly Q2.

• The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The manufacturing sector grew for the eighth consecutive month during March. The rate of growth as indicated by the PMI is the fastest since July 2004. Both new orders and production rose above 60 percent this month, closing the first quarter with significant momentum going forward. Although the Employment Index decreased 1 percentage point to 55.1 percent from February's reading of 56.1 percent, signs for employment in the sector continue to improve as the index registered a 10 percent month-over-month improvement, indicating that manufacturers are continuing to fill vacancies. The Inventories Index provided a surprise as it indicated growth for the first time following 46 months of liquidation — perhaps signaling manufacturers' willingness to increase inventories based on expected levels of activity."

MANUFACTURING AT A GLANCE MARCH 2010
Index	Series Index March	Series Index February	Percentage Point Change	Direction	Rate of Change	Trend* (Months)
PMI	59.6	56.5	+3.1	Growing	Faster	8
New Orders	61.5	59.5	+2.0	Growing	Faster	9
Production	61.1	58.4	+2.7	Growing	Faster	10
Employment	55.1	56.1	-1.0	Growing	Slower	4
Supplier Deliveries	64.9	61.1	+3.8	Slowing	Faster	10
Inventories	55.3	47.3	+8.0	Growing	From Contracting	1
Customers' Inventories	39.0	37.0	+2.0	Too Low	Slower	12
Prices	75.0	67.0	+8.0	Increasing	Faster	9
Backlog of Orders	58.0	61.0	-3.0	Growing	Slower	3
Exports	61.5	56.5	+5.0	Growing	Faster	9
Imports	57.0	56.0	+1.0	Growing	Faster	7
OVERALL ECONOMY				Growing	Faster	11
Manufacturing Sector				Growing	Faster	8