PMI Manufacturing Index

The manufacturing PMI finished March at a steady and firm rate of 55.6, 1 tenth lower than the mid month flash and three tenths above February’s reading. Strength in new orders; including export orders, is a highlight of the March report as is a 3-year high for business expectations. Output is strong but slowing and the sample continues to hire but at an easing rate. Capacity strengths are evident including the sharpest increase in delivery times in four years as well as a jump in input costs with respondents citing rising tariffs and also rising cost of raw material. These higher prices are being passed through to customers with rising selling prices currently at a five year high. The data in these past few months are showing accelerating factory conditions including building and signs of inflation.

ISM Mfg Index

ISM manufacturing eased back from February’s 14 year high, slipping 1.5 points and back below 60 to what is still a strong number at 59.3 for the month of March. Judging from the strength for orders, including both export orders and backlog orders, suggest the PMI may return into the 60 range in the next couple months. Questions of capacity stress have to be raised given a second 60-plus reading for supplier deliveries which indicates lengthening times and suggest that the supply chain is increasingly jammed up. Input costs, at 78.1 are at an 8 year high. But stress, isn’t appearing yet in the employment sector as the sample continues to find available applicants with related index at a very strong 57.3, which is down nearly two points from February.

Construction Spending

Construction spending has been soft as it only inched 0.1 percent higher in February after no change in January but there are signs of strengths in the details. The most important gains are being posted for new single family homes, up 0.9 percent for a second straight month for a yearly gain of 9.5 percent. Multi-family homes, where spending has been were, bounced back a monthly 1.2 percent for a yearly 0.9 percent for a second increase. The weakness in February’s overall report comes from homw improvements which fell a monthly 1.5 percent for only a 1.4 percent gain. Public spending also weakened in February with educational and highway spending both slipping into slightly negative group on the month. But private nonresidential spending is a positive, up 1.5 percent on the month though the year on year spending is still subdued at 1.1 percent. Power and manufacturing construction have been showing the most weakness though has they both posted gains in February. Transportation, despite a slip in February, has been very strong as has commercial building while office spending after a large monthly jump moved back into the positive column for its year on year rate. Overall year on year spending is still subdued, down 2 tenths to only 3.0 percent. Yet the gains in single family homes are a big plus for the housing market and should help build expectations for a desperately needed rise in housing supply which in turn would be a major plus for housing sales.

Mortgage Applications

Purchase applications for home mortgagees fell a seasonally adjusted two percent the week of March 30th, shrinking the year on year gain in the purchase index by 3 percentage points to 5 percent. Refinancing applications fell five percent in the week puling down the refinance share of mortgage activity by 0.9 percent. Despite the weekly decline, purchase applications continue to show solid year on year gains and point to housing market strength.

PMI Services Index                 

New orders remain strong but did ease in the month of March, pulling down the PMI to 54.0 for the month’s final reading vs 54.1 at mid-month and noticeably lower than February’s 55.9. Orders aside, output remained strong and hiring accelerated as well in the month for the best showing since last August.

ISM Non-Mfg Index

Unusual strength eased a bit in March for ISM’s non-manufacturing sample as the index came in near expectations at 58.8 vs. 59.5 in the prior two months. Growth in new orders remains very str5ong though the index is now under 60 at 59.5, for the first time since December. A key positive was a 1.6 point rise in employment to 56.6 which is strong for this reading.

Jobless Claims

After holding steady near record lows since the middle of January initial claims jumped 24,000 higher to 242,000, well over economists’ high estimates. There are no special factors behind the jump. Continuing claims in an offset, fell a very sizable 64,000 to 1.808 million in the week of March 24th which also falls outside the sample period for the monthly report. The unemployment rate for insured workers is unchanged for a fifth straight week at a very low 1.3 percent.

Employment Situation

March payroll growth of 103,000 is well below expectations but wage indications from average hourly earnings do show a little pressure as was expected, up 0.3 percent on the month with the year on year rate up 1 tenth to 2.7 percent. The unemployment rate did not move down which was the consensus among economists, instead it held steady at very low 4.1 percent. Looking at payroll growth, February and January have both been revised with a net of minus 50,000 as the result. The first quarter average of 202,000 is a bit below the fourth quarter’s 221,000. The breakdown for March shows another very strong showing for manufacturing up 22,000 which hits economists’ consensus and with professional and business services, a key component for tracking labor demand, rising a respectable 33,000. Yet the temporary help subcomponent for tis reading fell 1,000 after rising 21,000 in February. Construction payrolls which have been on the rise, fell 15,000. Retail also fell, down 4,000 in the month.