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US manufacturing growth accelerated in March as robust demand
and improving prospects countered the headwinds of soaring cost
pressures and the Russia-Ukraine war.
The S&P Global US Manufacturing Purchasing Managers' Index™
(PMI™) posted 58.8 in March, up from 57.3 in February to signals
the strongest improvement in the health of the US manufacturing
sector since last September.
The details of the survey were even more encouraging than the
rising headline number, with output and demand growth on improving
trends as supply delays eased, jobs growth accelerated and
businesses becoming even more optimistic despite the month seeing
the escalation of the Russia-Ukraine war. Price pressures also
showed tentative signs of having peaked late last year.
Output and order book growth accelerates
A key driver of the higher PMI was faster growth of production,
which rose at a rate not seen since last July. The strengthening
production index from the PMI is broadly indicative of robust
official manufacturing output growth in excess of 1% on a
three-month-on-three-month basis.
Inflows of new business also grew at the strongest rate for six
months as customers looked to the further reopening of the economy
amid signs that the disruptions from the pandemic continue to fade.
Both domestic and export order book growth improved, with new
export orders notably rising at the joint-fastest pace for almost a
year.
The rise in demand meant new order inflows once again ran ahead
of production to suggest that output growth could have been even
stronger had it not been for ongoing constraints on production,
though notably the output shortfall relative to demand was the
joint-smallest seen over the past year.
Supply bottlenecks show further signs of
easing
While higher output was encouraged by the upturn in order book
growth, it was also facilitated by fewer supply constraints.
Separately, even as companies continued to report widespread
production constraints due to supply chain bottlenecks, the
incidence of such delays is now lower than at any time since
January 2021.
Likewise, backlogs of work at manufacturers also grew at a
reduced rate comparable to that seen throughout much of 2021,
linked to these easing supply constraints as well as jobs growth
having improved to an eight-month high as fewer companies reported
labor shortages.
Elevated price pressures, but inflation rates are off
last year's highs
Similarly, although price pressures remained elevated, with
surging energy costs pushing firms' costs higher at an increased
rate in March, rates of inflation of both input costs and average
selling prices have fallen from the record highs seen late last
year to hint that US consumer price inflation could likewise soon
peak.
Brightening prospects despite Ukraine war
It was especially encouraging to see business optimism about the
year ahead improve further in March, despite the new uncertainties,
sanctions and geopolitical risks caused by the Ukraine invasion,
with optimism among producers now the brightest since
late-2020.
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
