Finance & Economics

US Manufacturing Sector Demonstrates Growth

In March, the United States recorded an increase in industrial production for the first time in 1-1/2 years.

US Manufacturing Sector Demonstrates Growth

Currently, a recovery is being recorded in the manufacturing sector of the mentioned country, which has significantly improved the indicators that worsened during the downturn, which lasted more than a year. In the United States, manufacturers are recording an increase in the number of orders. At the same time, the employment rate in factories continues to be low. The United States manufacturing sector is also facing higher prices for inputs.

The Institute for Supply Management (ISM) on Monday, April 1, released information according to which its purchasing managers’ index (PMI) in the specified sector increased to 50.3 in March. This indicator exceeded 50 for the first time since September 2022. Separately, it is worth noting that in February PMI was 47.8.

For 16 months, the manufacturing industry of the United States was in a condition of downturn. The share of this sphere of activity in the US economic system is 10.4%.

The PMI, which exceeds the 50 mark, is evidence that the manufacturing sector is on a growth trajectory.

Industry surveys published in recent months have exaggerated the weakness of the United States manufacturing industry, which has faced limited development opportunities amid high borrowing costs. Government data turned out to be more optimistic. The relevant information was published last week. According to government data, in the fourth quarter of 2023, manufacturing output in the United States showed an increase of 0.9% compared to the same period in 2022. For the whole of last year, the mentioned indicator grew by 1.6%. In 2022, manufacturing output increased by 0.8%.

Economists surveyed by the media predicted that PMI would rise to 48.5 in March. The final result was higher than expected. In March, consumer spending in the United States shifted towards the services sector. At the same time, demand for goods continues to show stability.

The sub-index of new orders calculated by ISM was fixed at 51.4 in March. In February, this indicator was 49.2.

The factories’ output in the United States has recovered. The production sub-index in March was 54.6. In February, this indicator was fixed at 48.4.

So far, there have been no signs of supply chain restrictions in the United States due to Houthi attacks on international shipping in the Red Sea. The supplier delivers index fell to 49.9 in March from 50.1 in February. In this case, a reading below 50 indicates an acceleration of supplies.

Factory inflation in the United States has accelerated. The indicator of prices paid by manufacturers rose to 55.8 in March from 52.5 in February. At the same time, employment at factories continued to decline last month. It is worth noting that this process has a moderate pace. The manufacturing employment index rose to 47.4 in March from 45.9 in February.

Timothy Fiore, chairman of the ISM Manufacturing Business Survey Committee, said that demand in the United States remains in the early stages of recovery, noting that there are clear signs of improving conditions. According to him, production figures increased in March as companies reentered expansion.

Last month, textile mills, the sphere production of non-metallic minerals, paper products, and petroleum products demonstrated a significant improvement in the mentioned figures. Positive dynamic is also recorded in areas such as plastic and rubber products, furniture, and electrical equipment.

The heads of national purchasing and supply services are currently showing an optimistic attitude towards the prospects of the United States manufacturing sector. The increase in the number of orders is evidence that consumer demand is stable and the same situation is typical for business investment. Moreover, in the United States, companies have been able to make progress in getting inventory levels in line with sales volume.

ISM data indicate that US factory stockpiles contracted more slowly in March than in February. At the same time, a similar dynamic of consumer inventories shrank at a faster pace.

Currently, the United States is recording an increase in the cost of materials and other inputs. This tendency is evidence that inflationary pressures are stable. The gauge of prices paid in March increased by 3.3 points compared to the February figure, amounting to 55.8. The mentioned indicator is the highest since July 2022.

ISM expects that in the second quarter of the current year, the volume of orders and production in the United States will increase. It is predicted that suppliers of transportation equipment will grow in profitability by the end of 2024 and will be on a positive dynamic trajectory in 2025.

ISM also reports that in the area of computer and electronic products, the level of demand continues to be low. At the same time, there is optimism about the prospects for order growth. Commercial performance in the area of computer and electronic products is expected to improve significantly in the second quarter of the current year. Moreover, ISM reports that business in the sphere of fabricated metals is at a high level.

As we have reported earlier, US Authorities Revise Economy Fourth-Quarter Growth.

Serhii Mikhailov

2141 Posts 0 Comments

Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.