U.S. manufacturing activity surges to its highest level in nearly 40 years

2 minutes
U.S. manufacturing activity surges to its highest level in nearly 40 years

WASHINGTON- A measure of the U.S. manufacturing activity in March soared to its highest level in more than 37 years, driven by strong growth in new orders, the clearest sign yet that a much anticipated economic boom was likely underway.

On Thursday, the Institute for Supply Management said its index of national factory activity jumped from 64.7 in February to 60.8 in August. This level has been the highest since December 1983; A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy.

Economists polled by Reuters predicted the index would rise in March to 61.3. The one-year COVID-19 pandemic has boosted demand for goods. The economic growth is expected to take off this year, boosted by the White House's Nonessential 1.9 trillion -dollar pandemic relief package and the reopening of significant business as more Americans are vaccinated against the virus.

The relief package passed last month will extend additional$ 1,400 checks to qualified households and send the government safety net for the unemployed through Sept. 6.

Households have also accumulated about$ 9 trillion in surplus savings, which are expected to fuel pent-up demand. On Wednesday, President Joe Biden unveiled a plan to spend around$ 2 trillion on infrastructure like roads and bridges over 10 years.

Estimates for the first quarter gross domestic product are as high as a 10.0% annualized rate.

The economy grew at a 4.3% pace in the fourth quarter; growth this year could top 7%, which would be the fastest since 1984. The economy contracted in 2020 to 3.5%, the worst performance in 74 years. But the massive domestic stimulus could be leaving the economy pushing against fiscal capacity constraints and stimulating inflation. Suppliers are already trying to increase the cost of manufacturing materials by pushing up production costs.

The most obvious example has been the automotive industry, where a global semiconductor chip shortage has forced cut-off of production.

The ISM Survey's measure of prices paid by manufacturers last month hovered near its highest since July 2008. In March, its new orders sub-index jumped to 68.0.

That was the highest reading since January 2004 and is up from 64.8 in February.

Factories also received more export orders, while order backlogs swelled. There is room for further expansion, with inventories at manufacturers and clients still lean. With demand robust, factories hired more workers in March; The manufacturing employment gauge of the survey rose to 59.6, the highest reading since February 2018, from 54.4 in February 2018.

That supports expectations for a sharp acceleration in employment growth in March. According to a Reuters survey of economists, non-farm payrolls were likely to increase by 647,000 jobs last month after increasing in February by 379,000. On Friday, the government is due to publish the employment report of March.

  • Comments
Loading comments...