U.S. manufacturing expanded in March at the fastest pace since 1983, driven by the strongest orders and production readings in 17 years. The data add to evidence of an economy poised to accelerate.
According to Institute for Supply Management data released Thursday, a gauge of factory activity jumped to 64.7 from 60.8 a month earlier. Index levels above 50 indicate expansion and the March figure topped all but one estimate in a Bloomberg survey of economists.
Stronger growth in new orders and output highlight the increasing domestic and business demand as fewer pandemic-related restrictions and fiscal relief provide a clearer path for economic recovery. The stocks extended after the report; Manufacturing economy continued its recovery in March, said Timothy Fiore, chair of the Manufacturing Business Survey Committee on a statement.
At the same time, purchasing managers reported that their companies and suppliers continue to struggle to meet increasing rates of demand due to coronavirus impacts limiting availability of parts and materials. All but one of 18 ISM manufacturing industries reported growth in March, sparked by textiles, electrical equipment and appliances, machinery and computers and electronic products.
The US data reflect results from around the world: factory activity in Taiwan strengthened after the volatile Lunar New Year period, with Asia leading the way according to IHS Markit.
The group's purchasing managers index for the U.K. advanced to a decade high, while Eurozone manufacturing was historically strong. In March, the ISM's measure of the US order backlogs climbed to the strongest reading in deliveries back to 1993 and a gauge of the supplier delivery times reached an almost 47 year high. Both indexes underscore the supply challenges faced by producers who also pay more for raw materials and shipping.
The shortages of semiconductors have been particularly disruptive for the auto industry, where production in recent months has been strained due to the lack of supply. On Wednesday, Ford Motor Co. announced it was idling plants that make its best-selling F 150 pickup truck because of chip shortages.
Extended lead times, critical basic supplies shortages of broad-scale materials, rising commodity prices and difficult transportation of products are affecting all segments of the manufacturing economy, Fiore said. The demand remains strong, significant supply impacts on raw materials due to the Texas freeze.
All major raw material and suppliers on force majeure.
Chemical products- Chemical Products Business conditions are favorable for our industry and company. The constraints are mainly related to parts availability. The shortage of human resources is also a constraint; the need to recruit new members is a challenge. - Transportation Equipment.
Qualified new hires are an ongoing challenge: We have had to provide better compensation to keep qualified talent on the job. - Fabricated metal products. Suppliers are struggling to manage demand and capacity in the face of chronic logistics and labor issues. There is no end in sight.
- Machinery- In February, the business bottomed out; we expect steady improvement until the end of the year. Furniture- Furniture- Furniture At 85.6 in March, the group index of prices paid for inputs was little changed from the 86 reading on February 1, which was the highest since July 2008. Growing order backlogs, increased production and faster orders growth have encouraged manufacturers to beef up headcounts.
The ISM's measure of factory employment improved from a 3-year high of 59.6 a month earlier to a more than three-year high in March. The monthly jobs report for Friday is projected to show that manufacturing payrolls in March have increased by 35,000, the strongest in four months. The general employment is expected to rise 650,000; while robust business inventories suggest robust output and orders to factories are sustained in the coming months.
The ISM's gauge of customers inventories dropped back to 1997 to the lowest in records. With demand seen as the nation is vaccinated against the coronavirus in the summer months, producers may expect to see order books and assembly lines remain full.
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