Manufacturing growth slows slightly in March

WASHINGTON – Manufacturing activity cooled off a bit last month after expanding in February at the fastest pace in nearly seven years.

The Institute for Supply Management said Friday that the sector grew for the 20th straight month. The trade group's index of manufacturing activity dipped to 61.2 from 61.4 in February, the highest reading in nearly seven years.

Any reading above 50 indicates growth. The index bottomed out during the recession at 33.3 in December 2008, the lowest point since June 1980.

Measures of new orders and new export orders dropped, though they remained well above levels that signal growth. Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the declines could reflect the impact of Japan's earthquake and tsunami, which have disrupted global manufacturing supply chains. Japanese firms are leading suppliers of parts to automakers and electronics companies around the world.

"Overall, this is still a very robust report," Shepherdson said.

One concern is higher material costs. Manufacturers are paying higher prices for cotton, steel and other commodities, and many are expressing concern that the inflation could cut into their profit margins, the survey found.

The prices index rose slightly in March to the highest level in almost three years. That could also contribute to broader inflation if manufacturers pass on some of the higher costs.

"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," said Norbert Ore, chairman of the committee that oversees the survey.

Factory production increased at a faster pace last month, the report showed. The production index rose to its highest level in more than seven years.

Other aspects of the report were mixed. Order backlogs are still growing, but at a much slower rate. The survey's employment index dipped, although February's pace was the fastest in 38 years.

Manufacturing has been a key driver of economic growth and employment since the recession ended in June 2009. Consumers are spending more on autos, appliances and electronic goods.

General Motors said Friday that car and truck sales rose 11 percent in March, a smaller increase than the previous two months. But the company said it offered fewer rebates and incentives.

Manufacturers added 17,000 jobs in March, the Labor Department said Friday. Factories have added nearly 200,000 jobs in the past year.

Overall, the economy added 216,000 jobs in March, the second straight month of strong job growth. The unemployment rate fell to 8.8 percent from 8.9 percent. The rate has fallen a full percentage point since November.