Manufacturing activity recovers slightly
Survey of purchasing managers edges higher in March, surprising economists, but index below expansion level.
NEW YORK (CNNMoney.com) -- A key index of manufacturing activity rose unexpectedly in March, but the indicator remained below the level that shows growth in the sector.
The Institute for Supply Management's (ISM) manufacturing index rose to 48.6 from 48.3 in February, the institute announced Tuesday. Economists were expecting a reading of 47.5, according to a consensus compiled by Briefing.com.
A reading below 50 represents a decline in manufacturing activity while a reading above that level indicates growth.
"The ISM number is one that's consistent with a flattish economy as opposed to one that's declining," said Michael Strauss, chief economist at Commonfund.
The index's measure of what manufacturers pay for materials rose a full 8 points to 83.5 over February's reading. This is the highest reading since October 2005.
"Manufacturers continue to experience heavy cost pressures, as the prices they pay are still rising even with slower overall demand," said Norbert Ore, chair of the ISM's Manufacturing Business Survey Committee.
While input cost pressures are certainly an issue, they are moderating "as we speak," Strauss said.
The parts of the index that measure new orders for manufactured goods and production activity both fell. The components that gauge employment and supplier delivery both rose more than 3 points.
Meanwhile, the index showed continued growth in manufacturer's export order flow, an area that has been growing steadily for more than five years.
Exports could be a "hidden pocket" of strength that is helping the manufacturing sector weather adverse economic conditions, Strauss said.
Imports, on the other hand, have declined over the last two months.
Overall, Strauss was reluctant to call the report a "bright spot" in the current economic climate.
"It's a gloomy day and the ISM number suggests that it will be cloudy but not rainy," he said.
The ISM reading follows a number of economic reports out recently that suggest the economy is in a slowdown - and possibly a recession.
Last week, the Commerce Department released its final reading on gross domestic product, the broadest measure of the nation's economic health, showing an anemic growth rate of 0.6% in the fourth quarter.
Also out last week, a report on consumer spending showed no signs of recovery in the sector that fuels more than two-thirds of the nation's economic activity. 
