ISM Manufacturing March 2021

A measure of manufacturing activity in the United States reached its highest level in over 37 years in March, driven by strong growth in new orders, the clearest sign to date that a much-anticipated economic boom was probably in progress.

The Institute for Supply Management (ISM) said Thursday that its index of domestic factory activity rose to 64.7 last month, from 60.8 in February. This was the highest level since December 1983.

A reading above 50 indicates an expansion in the manufacturing sector, which accounts for 11.9% of the US economy. Economists polled by Reuters had forecast the index to reach 61.3 in March. The year-long Covid-19 pandemic has boosted demand for goods.

Economic growth is expected to take off this year, bolstered by the White House’s massive $ 1.9 trillion pandemic relief package and the reopening of non-essential businesses as more Americans are vaccinated against the disease. coronavirus.

The relief program adopted last month sends additional checks for $ 1,400 to qualified households and extends the government’s safety net for the unemployed until September 6. Households have also racked up around $ 19 trillion in excess savings, which are expected to fuel pent-up demand.

President Joe Biden on Wednesday unveiled a plan to spend around $ 2 trillion on infrastructure like roads and bridges over 10 years.

Estimates of gross domestic product for the first quarter are at an annualized rate of 10.0%. The economy grew 4.3% in the fourth quarter. Growth this year could exceed 7%, which would be the fastest since 1984. The economy contracted 3.5% in 2020, the worst performance in 74 years.

But the massive fiscal stimulus could let the economy grow against domestic capacity constraints and fan inflation. Suppliers are already struggling to deliver materials to manufacturers, driving up production costs. This has been particularly evident in the automotive industry, where a global shortage of semiconductor chips has resulted in production cuts.

The ISM survey measure of prices paid by manufacturers last month hovered near its highest since July 2008.

Its forward-looking new orders sub-index jumped to 68.0 in March. This was the highest reading since January 2004 and was 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 their customers still thin. With robust demand, factories hired more workers in March. The survey’s manufacturing employment gauge climbed to 59.6, the highest value since February 2018, from 54.4 in February.

This confirms expectations of a strong acceleration in employment growth in March. Non-farm payrolls likely increased by 647,000 jobs last month after increasing 379,000 in February, according to a Reuters survey of economists. The government is due to release the March jobs report on Friday.