This week, the Institute for Supply Management (ISM) released their Purchasing Managers Index for both Services and Manufacturing for the month of March. The Services Sector missed expectations and fell slightly but remains above contraction territory (<50.0) at 51.4. The most recent report indicated that the Index is still growing, but at a slower rate. The New Orders component also grew at a slower pace in March, seeing a decrease to 54.4.
The Manufacturing Sector surprised to the upside and finally pulled out of contraction territory (<50.0) after 16 consecutive months, coming in at 50.3. This return to growth marked an end to its third longest streak of contraction on record. Many subcomponents of the Index improved, including a return to growth in New Orders. However, it is worth noting that this positivity came along with a sizable increase in Prices Paid, which could have implications on manufacturing-related inflation data in the coming months. Additionally, the Employment Index was much less optimistic and remained in contraction for the sixth consecutive month.
The ISM surveys surprised in both directions this week, and services and manufacturing are now back in growth territory together. However, to confirm that both sectors are indeed growing in tandem and at a sustainable rate, continued improvement is necessary – particularly in the fickle manufacturing sector. Additionally, we will be watching closely for continued improvement in the services sector.