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Numbers: US manufacturers grew faster in March, with a key index reaching a 38-year high, indicating an acceleration in the US economy.
The Institute for Supply Management said its manufacturing index jumped to 64.7% from 60.8% the month before. Readings above 50% indicate growth, and anything above 55% is considered exceptional.
The increase exceeded Wall Street’s expectations. Economists polled by Dow Jones and the Wall Street Journal had forecast the ISM index to reach 61.7%.
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What happened: Seventeen of the 18 industries tracked by the ISM grew in March, with most reporting increased production, new orders and employment
The production indicator rose 4.9 points to 68.1% while the new orders index rose 3.2 points to 68%.
The employment barometer rose for the fourth consecutive month and hit a three-year high of 59.6%.
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Also: Jobs are coming back as the economy grows
The United States probably created nearly 700,000 new jobs or even more in March, economists estimate. The government will release the widely watched US jobs report on Friday morning, although markets are closed due to the Good Friday holiday.
The main problems that manufacturers are currently facing are shortages of some essential products that hamper production and increase prices. Finding enough skilled workers, especially during a pandemic, has also been a chronic problem.
“The business conditions are positive for our industry and our company. The constraints are mainly related to the availability of parts, ”said a senior manager at a transportation equipment manufacturer. “Labor is also a constraint. Hiring new members is a challenge. “
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The ISM Index is compiled from a survey of senior executives who are asked if business is getting better or worse. The indicator tends to rise or fall along with the health of the economy.
Big picture: Manufacturers led the rebound in the United States and production has returned to near normal, but a full recovery will not be possible until the global pandemic subsides.
Supply chains around the world have been disrupted, making it more difficult for manufacturers to get the parts they need to meet the growing demand for their products. The recent episode of a large ship stuck in the Suez Canal will only exacerbate the problem for some time.
See: A visual look at how an unfair pandemic has reshaped work and home
What do they say? “Growth will remain very strong over the next few months as consumers continue to spend their stimulus funds, people will feel more comfortable going out and businesses will reopen,” said Chief Economist Gus Faucher of PNC Financial Services. “US manufacturers will benefit from strong domestic and foreign economic growth.”
Market reaction: The Dow Jones Industrial Average DJIA,
and S&P 500 SPX,
prolonged gain in Thursday trades after report.
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