As Recovery Accelerates

• The ISM manufacturing index jumped sharply in March, to its highest level since 1983.

• There was strength across all aspects of manufacturing, and across all manufacturing industries.

• Manufacturing will remain very strong through 2021 as the U.S. economy recovers from the pandemic.

The ISM (Institute for Supply Management) manufacturing purchasing managers index jumped to 64.7% in March, the highest reading since December 1983. A reading of above 50 indicates expansion in U.S. manufacturing. The index jumped 3.9 percentage points from 60.8% in February.

The index plunged to 41.7% in April 2020 as factories closed and demand plummeted in the early stages of the pandemic. But it has steadily recovered since then as economic activity has improved.

All five of the major components used to calculate the overall index rose in March from February, and all were above the 50% mark. New orders jumped 3.2 points to 68.0%, indicating continued strong near-term demand for manufactured goods. Production jumped 4.9 points to 68.1%, and employment jumped 5.2 points to 59.6%. Supplier deliveries were extremely high at 76.6%, up 4.6 points over the month, as winter storms disrupted already stretched supply chains. Inventories crossed into expansion, up 1.1 points to 50.8% in March.

New orders were at their strongest since 2003, production since 2004, and supplier deliveries since 1974.

Other details were generally solid. Order backlogs remain very high, customer inventories are extremely tight, and prices for raw materials are uniformly rising.

All six of the major manufacturing industries covered reported expansion in March: computers and electronic products; fabricated metal products; food, beverages and tobacco; transportation equipment; chemicals; and petroleum and coal. 17 of the 18 industries covered reported expansion in March; textiles was flat.

The U.S. economy is heating up in the spring. Stimulus and vaccinations are supporting consumer spending on manufactured goods, the housing market is extremely strong, and business investment is picking up with the overall economy.

Growth will remain very strong over the next few months as consumers continue to spend their stimulus funds, people feel more comfortable going out and businesses reopen. U.S. manufacturers will benefit from strong domestic and foreign economic growth. 

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