War fears put stop to four-month resurgence

Don Hogsett, Staff Staff, April 14, 2003

Snapping a four-month winning streak, U.S. manufacturing slammed on the brakes during March and activity in the nation's plants slowed for the first time since November, with almost every major indicator heading south, according to a key economic barometer prepared by the nation's purchasing managers.

With the threat of war hanging over the nation's economy during early March, manufacturing activity sputtered as business executives grew increasingly wary. And the fear of war may have been worse than the reality, once it actually started. "The start of the war will begin to bring clarity to a difficult situation," said Norbert Ore, chairman of the Institute for Supply Management's Business Survey Committee. "In many ways, the threat of war was more intimidating than the actualization."

With the situation in Iraq increasingly unsettled, production fell for the first time in 16 months, and new orders dropped for the first time in six months.

Every key manufacturing indicator but two dipped lower in March. And one of those that rose was one nobody wanted to see: the prices that manufacturers pay for raw materials. In one more jolt to a sector that doesn't need it, the Prices Index climbed by 4.5 percentage point.

The only other gainer during march was the Exports Index, which grew by 3.5 percentage points, aided by a weak U.S. dollar.

"The manufacturing sector failed to grow in March, marking the end of four consecutive months of growth," said Ore. "The sector appears to have lost its momentum. Employment continues to be a problem," with that key index falling below a level of 50 percent for 30 straight months. Anything beneath a level of 50 percent points to a decline in activity, while anything above it indicates an increase.

Especially hard hit in March was the Backlog of Orders Index, which fell by 7.5 percentage points, a ninth straight monthly decline.

March snapshot
Manufacturing benchmarks
month-over-month percentage-point change

Source: Institute for Supply Management
Purchasing Managers' Index -4.3
New Orders -3.5
Production -9.1
Employment -0.7
Inventories -1.5
Customers' Inventories -4.0
Prices Manufacturers Pay +4.5
Order Backlogs -7.5
Export Orders -3.5
Imports -2.9

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