U.S. manufacturing activity expanded strongly in March, hitting a level not seen since 1983, according to the Institute for Supply Management’s monthly Report on Business. The ISM reports manufacturing activity jumped 3.9% in March to 64.7% in the sector’s tenth straight month of expansion.
New orders, production and employment all expanded strongly in March. Meanwhile, supplier deliveries slowed at a faster rate, raw material inventories grew, prices were on the rise again and both imports and exports are advancing.
Optimism among manufacturing executives soared once again, with 8 optimistic comments for every cautious comment (compared to the 5 to 1 ratio in February and the 3 to 1 ratio reported in January).
However, the sector continues to face many COVID-related challenges, with many reporting shortages of parts and materials, extended lead times, worker absenteeism, and rising prices.
One executive in the machinery sector reported, ““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.”
Said Timothy Fiore, Chair of the ISM committee, “Manufacturing performed well for the 10th straight month, with demand, consumption and inputs registering strong growth compared to February. Labor-market difficulties at panelists’ companies and their suppliers persist. End-user lead times (for refilling customers’ inventories) are extending due to very high demand and output restrictions as supply chains continue to recover from COVID-19 impacts.”
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Of eighteen industries, seventeen reported growth in the month of March, with growth strongest in textile mills, electrical equipment, appliances & components, machinery, computer & electronic products, apparel, leather & allied products and furniture.
Notably, not a single industry posted a contraction last month.
The ISM listed several commodities in short supply, including acetone, plastics, adhesives, aluminum extrusions, corrugated boxes, and electrical components.
New Orders Rebound Strongly
New orders expanded strongly in March, climbing 3.2%, now registering a robust 68%-- the metric’s tenth consecutive month of growth.
One executive in the electrical equipment industry said, “Business is even stronger for us this year through the third quarter, and we expect a very healthy growth of our manufacturing sales.”
Another in the chemical products industry told the ISM, “Demand remains strong. Significant supply impacts on raw materials due to the Texas freeze. All major raw-material and suppliers on force majeure
Related: 11 Key Takeaways from MNI’s 2021 Survey of Manufacturers
Fifteen of eighteen industries reported an increase in new orders for March, led by apparel, leather & allied products, electrical equipment, appliances & components, textile mills, and paper products.
Only one industry showed a decrease in new orders: wood products.
Manufacturers Crank Up Production
Production also expanded in March, rocketing 4.9% to a reading of 68.1%.
March’s reading represents a tenth straight month of growth for manufacturing output.
Fourteen of eighteen industries reported growth in output, led by textile mills, electrical equipment, appliances & components, petroleum & coal products, machinery, computer and electronic products and primary metals. No industries reported a contraction.
Employment Advances Further Into Expansion
The ISM employment index is one metric that has struggled to remain in expansion over the past several months. In 2021, however, employment continues to advance, in March surging 5.2% to a reading of 59.6%.
Said one respondent in the fabricated metals sector stated, ““A lack of qualified machine and fabrication shop talent makes it difficult to keep up with production demands when there is no backup (second string). Qualified new hires are an ongoing challenge. We have had to provide better compensation to keep qualified talent.”
Fourteen of eighteen industries reported employment growth in March, led by electrical equipment, appliances & components; textile mills, primary metals, machinery, and printing/related support activities.
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