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Business News/ News / World/  US manufacturing activity expands for first time since 2022

US manufacturing activity expands for first time since 2022

US factory activity unexpectedly expanded in March for the first time since September 2022 on a sharp rebound in production and stronger demand, while input costs climbed.

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US factory activity

US factory activity unexpectedly expanded in March for the first time since September 2022 on a sharp rebound in production and stronger demand, while input costs climbed.

The Institute for Supply Management’s manufacturing gauge rose 2.5 points to 50.3 last month, according to data released Monday. While barely above the level of 50 that separates expansion and contraction, it halted 16 straight months of shrinking activity.

The March index exceeded all estimates in a Bloomberg survey of economists.

Production snapped back sharply from a month earlier with a gain of 6.2 points that was the largest since mid-2020. At 54.6, output growth was the strongest since June 2022.

The group’s measure of new orders also returned to expansion territory after contracting in February. The factory employment gauge shrank less in March than a month earlier.

“Demand remains at the early stages of recovery, with clear signs of improving conditions. Production execution surged compared to January and February, as panelists’ companies reenter expansion," Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement.

Nine industries reported growth in March, led by textile mills, nonmetallic minerals, paper products and petroleum. Six contracted, including furniture, plastics and rubber products, and electrical equipment.

More Optimism

The nation’s purchasing and supply management executives have recently expressed optimism about the outlook for manufacturing. Firmer orders growth illustrates resilient consumer demand and business investment, and suggests companies have made strides getting inventory levels in line with sales.

The ISM data showed factory stockpiles contracted at a slower rate last month than in February, while a measure of customer inventories shrank at a faster pace.

“Customers’ inventory levels decreased at a faster rate in March, with the index retreating a bit more into ‘too low’ territory. Panelists report their companies’ customers continue to have a shortage of their products in inventory, which is considered positive for future new orders and production," Fiore said.

At the same time, the cost of materials and other inputs is rising, suggesting stubborn inflationary pressures. The group’s gauge of prices paid rose by 3.3 points to 55.8, the highest since July 2022.

Select ISM Industry Comments

“Performance continues to defy projections of a downturn in activity. Demand remains strong, and the pipeline for orders is robust." - Chemical Products

“Expecting to see orders and production pick up for the second quarter. Suppliers are working with us to help drive costs down, which will help improve the margin for the rest of the year and deliver growth in 2025." - Transportation Equipment

“Demand remains soft, but optimism is high that orders are ‘just on the horizon.’ Expectations are for a strong second quarter." - Computer & Electronic Products

“Noticing an increase in suppliers’ selectiveness regarding orders they quote and take." - Machinery

“Business is still strong — we are meeting and exceeding our forecasts. So far, we’re not hearing anything negative with our customers as far as ongoing business is concerned — it’s the same for raw material suppliers, nothing negative." - Fabricated Metals

“Continue to experience a softness in the industrial sector. There is optimism that order activity will increase in the late second quarter, leading to improvement in this segment for the second half of the year. “ - Primary Metals

“Business activity is up. Many manufacturers are anticipating better business in the second quarter and much better in the third quarter. They are reporting that second-quarter bookings are just starting to ramp up." - Wood Products

Meanwhile, orders from overseas customers, backlogs and imports were all unchanged in March.

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Published: 01 Apr 2024, 10:30 PM IST
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