By Juliet Jeske
April 1, 2021
The manufacturing sector continued its non-stop growth in March reaching its highest level since December 1983, a sign that the U.S. economy is headed for a healthy recovery after a massive contraction due to the COVID-19 virus.
The March Manufacturing PMI registered 64.7%, an increase of 3.9 percentage points from the February reading of 60.8%. Readings over 50% are considered a sign of expansion, monthly increases are a sign of greater growth.
“No one thinks when we are already having record breaking numbers like they that they will keep going up, but they just keep going up, said Michael R. Englund, chief economist, Action Economics LLC. “ It was a strong report, everything is going through the roof.”
Manufacturing has now expanded for almost a year, the improvement is widespread and comes despite supply shortages disrupting some industries. It is also likely to propel further economic gains.
Manufacturing in the United States expanded for the 10th straight month. The survey’s employment numbers shot up from 54.4% in February to 59.6% in March the highest since February 2018.
Of the 18 manufacturing industries, 17 reported growth in March. Demand is so high some manufacturers are facing difficulties finding raw materials and supplies. Many suppliers said that the winter storms in Texas and the southern part of the country were still negatively affecting supply chains.
“New Orders are the highest since 2003, employment highest since 2018, and the production series is the highest since 2004,” said Troy Ludtka, economist at Natixis CIB Americas. “I projected that this report would be strong. I’m very encouraged it beat my bullish expectations,”.
All of this growth is despite recurring problems with supply chains, transportation and a worldwide shipping container shortage. Shipping containers are so coveted they are returning to China empty as Chinese exporters willing to pay more for an empty container than one full of goods. Shipping docks are backlogged. Container ships are anchored outside of major ports waiting for space to unload everything from washing machines, to raw materials and medical supplies.
The March jobs report will come out tomorrow. Economists are projecting as many as 600,000 job gains. All of this good news for the manufacturing sector should translate into more jobs for U.S. workers.
The $1.9 trillion dollar stimulus is also super charging this recovery. Many Americans will receive $1400 checks and unemployment benefits will be extended through September. This is while U.S. households have already accumulated $19 trillion dollars in excess savings. Some of this is fueling the manufacturing boom but it should help other sectors of the economy.
“The stimulus payments have been overwhelming but most of them have gone to people who don’t really need them. Hopefully when the leisure and hospitality sectors really open up, we can see some of that money shifted around,” said Englund.
With all of this growth and increase in demand politicians are worried it might cause a runaway Inflation.
“Never underestimate the political community’s desire to fetishize inflation. With the rebounding economy on a structural to medium term basis I don’t see inflation staying high,” said Ludtka.