Details of ISM Report
The ISM recently reported that its index of national factory activity reached 64.7 during the month of March. Compared to February, which only saw 60.8, this is a noteworthy increase over a short period of time. This increase can be largely attributed to the harsh winter storms that shuttered business and slowed manufacturing for several companies based in Texas. However, the number alone for US manufacturing in March is extremely notable. In fact, 64.7 represents the highest national factory activity index number since December of 1983.
Just as notably, the national factory activity index number also outpaced the already optimistic projections from economists, which had pegged the increase in March to only amount to 61.3. While really any number above 50 represents healthy economic activity by manufacturing companies, 64.7 shows how high the demand from consumers is following the dispersal of the $1,400 stimulus check over the course of March.
This demand from consumers helped to boost other major ISM indicators, including new orders, total production, and, most importantly, employment. In fact, the employment index for US manufacturing now sits at 59.6, an increase of 5.2 compared to the month of February.
The business growth across companies involved in US manufacturing also serves as a strong sign of economic recovery. The increase in activity is a major positive, although keeping up with consumer demand may prove to be difficult.
Economic Implications of Increased Manufacturing
Manufacturing activity increases are showing how heavy consumer demand is following the stimulus checks along with general business improvement. While this is positive news, the disruptions in global supply chains due to the pandemic may continue to cause delays in fulfilling consumer demand. As a result, many economists expect an increase in inflation until the supply meets the demand.
This is a minor concern, with most analysts also predicting that inflation will level out once supply chains recover fully later in the year. The economic gain will remain as the US companies in the manufacturing business represent 11.9% of the total US economy.
In his statements alongside the ISM report, Chair of the ISM, Timothy R. Fiore, said, “Manufacturing performed well for the 10th straight month, with demand, consumption and inputs registering strong growth compared to February. Labor-market difficulties at panelists’ companies and their suppliers persist. End-user lead times (for refilling customers’ inventories) are extending due to very high demand and output restrictions as supply chains continue to recover from COVID-19 impacts.”
With business booming at such a high rate in the manufacturing industry, expectations for further economic growth in 2021 remain extremely high.
About the Author
Tom Price is a writer focusing on entertainment and sports features. He has a degree from NYU in English with a minor in Creative Writing. He has been previously published for Washington Square News, Dignitas, CBR, and Numbers on the Boards.