U.S. Manufacturing Activity Gathered Further Steam in March -- IHS Markit

By Xavier Fontdegloria

U.S. manufacturing activity continued to expand solidly in March amid a surge in new orders and supply constraints, data from a survey compiled by IHS Markit showed Thursday.

The final reading for the U.S. Manufacturing Business Activity PMI Index for March was 59.1, virtually up from the preliminary print of 59.0 and above the 58.6 registered in February.

Economists polled by The Wall Street Journal expected the indicator to increase to 59.2. March PMI signals the second-strongest improvement since data collection began in May 2007.

The indicator shows that manufacturing activity in the U.S. grew for the ninth consecutive month as a level above 50 indicates expansion, and that the pace of growth for factory activity further increased compared with that of February.

Goods producers registered the fastest upturn in new business for almost seven years in March, the report said. Anecdotal evidence suggested the expansion was due to a broad-based strengthening of client demand, though led by a record surge in new orders for consumer goods.

While output rose for a ninth successive month, the faster rise in demand didn't translate into sharper production growth as output was reportedly constrained by supply shortages and unprecedented extensions to lead times, IHS Markit said.

Supplier lead times lengthened to the greatest extent on record. At the same time, inflationary pressures intensified, with cost burdens rising at the quickest rate for a decade, the report said.

"Although output continued to rise at a solid pace, capacity is being severely strained by the combination of soaring demand and supply chain disruptions: supply chain delays and backlogs of uncompleted orders are growing at rates unprecedented in the survey's 14-year history, meaning inventories of finished goods are falling at a steep rate," said Chris Williamson, chief business economist at IHS Markit.

In line with capacity constraints, backlogs of work accumulated at the fastest pace on record in March. As a result, firms expanded their workforce numbers further and at a solid rate, the report said.

"With business expectations becoming even more optimistic in March, further strong production growth looks likely in the second quarter, but the big question will be whether rising price pressures also become more entrenched," Mr. Williamson said.

Write to Xavier Fontdegloria at [e-mail]

(END) Dow Jones Newswires

04-01-21 1022ET