U.S. manufacturing continued to expand at a solid pace through March, and although the rate of growth moderated slightly, healthy demand is still driving strong monthly performance.

Business activity in the United States manufacturing sector posted strong growth in March, continuing the trend of steady, robust expansion seen through late 2010 and early 2011. While growth tapered off slightly last month, it remained near historic highs, solidifying manufacturing’s place as an important driver of economic activity in the ongoing recovery.

According to the Institute for Supply Management’s (ISM) latest manufacturing Report on Business, released last week, U.S. manufacturing expanded for the 20th consecutive month in March, reflecting overall growth in the U.S. economy, which expanded for the 22nd consecutive month.

The ISM’s purchasing managers’ index (PMI), an important monthly gauge of the factory sector, totaled 61.2 in March, slightly down from the 61.4 reading in February, which was the highest since May 2004, but still one of the strongest growth rates in recent years. The March PMI was well above the 12-month average of 57.9.

“An index value above 50 signals that manufacturing activity is growing, but a value of 60 or more is rare,” Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI, said in an analysis of the ISM report. “In the last 25 years, the monthly PMI index has been 60 or higher only 4 percent of the time. Manufacturing is clearly growing at a solid pace, led by pent-up demand for consumer durables such as motor vehicles and business equipment, including high-tech.”

Fifteen of the 18 industries tracked by the ISM reported growth last month: apparel, leather and allied products; transportation equipment; fabricated metal products; machinery; textile mills; computer and electronic products; furniture and related products; electrical equipment, appliances and components; food, beverage and tobacco products; paper products; petroleum and coal products; chemical products; plastics and rubber products; miscellaneous manufacturing; and printing and related support activities.

The latest monthly findings were roughly in line with expectations, as economists polled by MarketWatch had forecast the PMI to fall to 61.3 in March.

The ISM’s new orders index fell from 68 in February to 63.3 in March, indicating that demand continued to grow but at a slower pace, while the production index rose from 66.3 to 69.

However, the supplier deliveries index jumped from 59.4 in February to 63.1 in March, meaning the delivery performance of suppliers to manufacturing organizations was slower last month.

The employment index also experienced a slight decrease, falling from 64.5 in February to 63 in March, although this was only the fourth time in the past 10 years the monthly employment index has risen above 60. According to a U.S. Department of Labor report last week, manufacturing added 17,000 new jobs in March.

Despite generally positive indicators, concerns remain about rising prices and inflationary pressures.

“While manufacturers are benefiting from strength in new orders and production, there is significant concern with regard to commodity prices,” Norbert J. Ore, chair of ISM Manufacturing Business Survey Committee, said. “Many manufacturers indicate the prices they have to pay for inputs are rising, and there is concern about the impact of higher prices on their margins.”

The ISM prices index rose from 82 in February to 85 in March, the highest reading since July 2008 and the 21st consecutive month of price increases. While 72 percent of supply executives reported paying higher prices and 2 percent reported paying lower prices, 26 percent of respondents reported paying the same prices as in February.

Rising materials costs are proving troublesome across the globe, but economic conditions in the U.S. do not seem to point to large-scale inflation in the near-future.

“Worryingly for European policymakers, sustained growth in orders allowed eurozone manufacturers to pass on the costs of soaring raw materials to customers at a pace not seen since at least late 2002,” Reuters reports. “The inflation outlook in the United States was less clear cut. Rising gasoline prices have raised some eyebrows, but hiring remains anemic and wages stagnant, making an upward price spiral less likely.”

Earlier

Manufacturing Growth Accelerates into 2011

Manufacturing Grows at Faster Pace in January

Manufacturing Grows at Fastest Pace in Almost 7 Years

Unemployment Rate Falls to 8.8 Percent

Resources

March 2011 Manufacturing ISM Report on Business
Institute for Supply Management, April 1, 2011

MAPI Analysis on ISM Report: Manufacturing Growing at a ‘Solid Pace’
by Daniel J. Meckstroth
Manufacturers Alliance/MAPI, April 1, 2011

U.S. Manufacturing Growth Tapers Off a Bit
by Jeffry Bartash
MarketWatch, April 1, 2011

U.S. Jobless Rate Down as Global Factories Boom
by Pedro da Costa and Jonathan Cable
Reuters, April 1, 2011