The U.S. manufacturing sector had a very strong March, with employment, production and new orders hitting new highs, while optimism among executives continues to improve. And while the sector has mostly recovered from supply chain disruptions brought on by severe weather events in the U.S. South, industrial companies are still facing a number of challenges, from high prices to supply shortages.
Today, we’re exploring the key manufacturing business conditions for the month, compiling key takeaways from various reports on output, labor, new orders, optimism and regional activity.
Manufacturing Output Rebounds Strongly Across Nearly All Subsectors
Following a 2.2% drop in February, U.S. industrial output rebounded in March, advancing 1.4% , according to the latest report from the Federal Reserve, released April 15th.
Taken alone, manufacturing output jumped 2.7%, while mining rose 5.7%. Utilities offset these gains, sinking 11.4%, which the Fed largely attributes to wild temperature swings in February and March.
Taking a year-over-year look, U.S. industrial production is now 1% higher that it was twelve months ago. However, overall output is still 3.4% below its pre-pandemic level.
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Meanwhile, Capacity utilization in manufacturing advanced 1.9% in March to a level of 73.8%. This is after falling 2.3% in February.
Taking a closer look at the Fed’s manufacturing data, durable goods output rose 3% in March. Strong readings were seen in aerospace and miscellaneous transportation equipment, up 4.3%, as well as fabricated metal products (+4.3%); nonmetallic mineral products (+3.9%); and motor vehicles and parts (+2.8%) Notably, all durable goods subsectors posted a gain in output.
On the non-durable goods side, output rose 2.6%. Petroleum and coal products advanced the most, with output up 5.7% in that sector. Chemicals also performed well (+4.1%) as did printing and related support activities (+3%). Nearly all non-durable goods categories posted gains in output in March, with the sole exception of plastics and rubber, which declined 1.1%.
Hiring in U.S. Manufacturing Accelerates
Hiring in the U.S. manufacturing sector continues to accelerate, with industrial companies adding double the number of jobs in March compared to February. The Labor Department’s most recent report found manufacturers added 53,000 jobs, while the overall economy added 916,000 jobs.
Durable goods job gains were overwhelmingly led by the fabricated metals sector, which added 13,700 new jobs. This was followed by machinery (+3,500) and computer/electronic products (+3,100). Nearly all other durable goods sectors added jobs, with the sole exception of transportation equipment, down by 3,000 and motor vehicles and parts, which slashed 1,000 jobs.
On the non-durable goods side, miscellaneous nondurable goods led gains, with that industry up by 7,400 jobs. Printing and related support activities rose by 5,900 positions and food manufacturing climbed by 3,400,
A separate Labor Department report issued this month found that the U.S. manufacturing sector has still yet to fill more than a half million unfilled positions. The most recent Job Openings and Labor Turnover Survey (JOLTS), issued April 11th, found that manufacturing job openings continue to hover above the 500,000-job mark, with 528,000 unfilled positions reported in March.
Manufacturing Activity Surges to 38-Year High
Meanwhile, the Institute for Supply Management reported that U.S. manufacturing activity rose to its highest level in 38-years. Advancing 3.8% in March, the ISM reported manufacturing activity is now at 64.7%- a level not seen since 1983.
New orders continued to surge in March, rising 3.2% to 68% -- the tenth straight month of increased orders, with demand strongest in apparel, leather & allied products, electrical equipment, appliances & components and textile mills.
Optimism among executives also reached a new high, with five optimistic comments for every one cautious comment. However, many executives noted a number of challenges, from high prices to supply shortages to COVID-related labor challenges. One executive in the machinery sector complained of: ““Widespread supply chain issues. Suppliers are struggling to manage demand and capacity in the face of chronic logistics and labor issues. No end in sight.”
Manufacturers also cranked up production in March, with that index rocketing 4.9% to a reading of 68.1%. Output advances were led by textile mills, electrical equipment, appliances & components, and petroleum & coal products.
Regional Surveys Point to Accelerated Growth, But Challenges Remain
• Empire State Manufacturing Survey: Manufacturing continues to post strong gains in the New York region, according to the most recent Empire State Manufacturing Survey. The survey, conducted between April 2nd and April 9th, found that factory activity in the region hit 26.3, climbing 9 points. This ranks as the region’s strongest reading in several years. New orders, shipments and unfilled orders all advanced in the latest reading. Prices continue to surge, with input prices advancing at a rate not seen since 2008 and the prices received rising to a record high of 34.9%.
39% of executives responding to the survey indicated improving business conditions, while 12% reported worsening business conditions – an improvement over March’s optimism readings.
• Kansas City February Manufacturing Survey. Factory activity in the 10th district (encompassing Kansas, Colorado, Nebraska, Oklahoma, Wyoming, northern New Mexico and Western Missouri) advanced in March, with activity levels climbing two points to a reading of 26. The Fed’s composite index encompasses a wide range of metrics, such as production, new orders, employment, and supplier delivery times. Growth in the region was driven by primary metals, machinery and transportation equipment, according to the report.
• Richmond Fed Manufacturing Survey: Manufacturing activity in the 5th District, which includes Maryland/D.C.; North Carolina, South Carolina, Virginia and most of West Virginia, rose considerably in March, to a reading of 17, compared to 14 in February, mostly driven by an increase in the shipments index. Meanwhile, vendor lead time, rose to a record level of 61, breaking a 25-year record for the third month in a row.
• Texas Manufacturing Outlook Survey: Meanwhile, following the sharp losses due to the extreme weather conditions in Texas in February, the state’s factory activity rebounded sharply, surging 28 points to the survey’s highest-ever reading of 48. New orders, capacity utilization and shipments, all rose significantly.
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