Nation’s manufacturing gains more steam in March

U.S. manufacturing expanded in March at the fastest pace since 1983, catapulted by the firmest orders and production readings in 17 years. The data add to evidence of an economy poised to accelerate.

A gauge of factory activity jumped to 64.7 from 60.8 a month earlier, according to Institute for Supply Management data released Thursday. Index levels above 50 indicate expansion and the March figure topped all but one estimate in a Bloomberg survey of economists.

Some of the gain may reflect a bounce-back from February, when harsh winter weather in Texas, Louisiana and other Southern states knocked some oil refineries and petrochemical plants offline.

Stronger growth in new orders and output highlight accelerating household and business demand as increased vaccinations, fewer pandemic-related restrictions and fiscal relief provide a clearer path for the economic recovery. Stocks extended gains after the report.

“The manufacturing economy continued its recovery in March,” Timothy Fiore, chair of the institute’s Manufacturing Business Survey Committee, said in 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 the institute’s 18 manufacturing industries reported growth in March, led by textiles, electrical equipment and appliances, machinery, and computers and electronic products.

The U.S. data mirrors results from around the world. Factory activity across Asia strengthened after the volatile Lunar New Year period, with Taiwan leading the way, according to IHS Markit. The group’s purchasing managers index for the United Kingdom advanced to a decade high, while euro-area manufacturing was historically strong.

The institute’s measure of U.S. order backlogs climbed in March to the strongest reading in records back to 1993, and a gauge of supplier delivery times reached an almost 47-year high. Both indexes underscore supply challenges faced by producers that are also paying more for raw materials and shipping.

Shortages of semiconductors have been particularly disruptive to the auto industry, where production in recent months has been restrained because of 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.

On a call with reporters, Fiore said that while manufacturers previously anticipated the supply-chain challenges would be resolved in several months, “there’s a feeling now that we’ll go into the summer or into late summer. That struggle will continue as demand continues to grow, which is positive.”

Growing order backlogs, increased production and faster orders growth have encouraged manufacturers to beef up the work force. The institute’s measure of factory employment improved to a more than three-year high of 59.6 in March from 54.4 a month earlier.

Factories have steadily rehired workers since last spring, but have still only recouped about two-thirds of the jobs lost to the pandemic.

Meanwhile, lean business inventories suggest robust output and orders to factories will be sustained in coming months. The institute’s gauge of customer inventories dropped to the lowest in records back to 1997. None of the 18 manufacturing industries reported higher customer inventories.