A report released by the Institute for Supply Management on Thursday showed the pace of growth in U.S. manufacturing activity accelerated by much more than anticipated in the month of March.
The ISM said its Manufacturing PMI jumped to 64.7 in March from 60.8 in February, with a reading above 50 indicating growth in manufacturing activity. Economists had expected the index to inch up to 61.3.
With the much bigger than expected increase, the Manufacturing PMI reached its highest level since hitting 69.9 in December of 1983.
Despite the strong growth, Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee, noted companies and suppliers continue to struggle to meet increasing rates of demand due to the coronavirus pandemic limiting the availability of parts and materials.
“Extended lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are affecting all segments of the manufacturing economy,” Fiore said.
He added, “Worker absenteeism, short-term shutdowns due to part shortages, and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential.”
The bigger than expected increase by the headline index came as the new orders index climbed to 68.0 in March from 64.8 in February and the production index surged up to 68.1 from 63.2. Both indexes reached their highest levels since January of 2004.
The employment index also spiked to 59.6 in March from 54.4 in February, reaching its highest level since February of 2018.
Meanwhile, the report showed the prices index edged down to 85.6 in March from 86.0 in February, indicating a slight slowdown in the pace of price growth.
The ISM is scheduled to release a separate report on activity in the service sector in the month of March next Monday. The Services PMI is expected to rise to 57.4 in March from 55.3 in February.