MACRO: US manufacturing sees fastest growth since 1983

The ISM Manufacturing PMI surged to 64.7 in March from 60.8 in the previous month, beating analysts' expectations of 61.3. It is the highest reading since December of 1983. Sharpest increases were seen in production (68.1 vs 63.2 in February), new orders (68 vs 64.8, a level  not seen since January of 2004) and employment (59.6 vs 54.4, the highest since February of 2018). Inventories rebounded (50.8 vs 49.7). Meanwhile, new export orders (54.5 vs 57.2) slowed slightly while prices paid for inputs were little changed (85.6 vs 86).

 “The manufacturing economy continued its recovery in March. However, Survey Committee Members reported that their companies and suppliers continue to struggle to meet increasing rates of demand due to coronavirus impacts limiting availability of parts and materials", Timothy Fiore, Chair of the ISM said. Shortages of semiconductors have been particularly disruptive to the auto industry, where production in recent months has been restrained due to the lack of supply.

Markit survey approached its record highs while ISM reached its highest since 1983. Source: Bloomberg via ZeroHedge

“Pricing power has risen accordingly as demand outstrips supply: raw material prices are increasing at the sharpest rate for a decade and factory gate selling prices have risen to a degree not seen since at least 2007." “The fastest rates of increase for both new orders and prices was reported among producers of consumer goods, as the arrival of stimulus cheques in the post added fuel to a marked upswing in demand as the economy continued to pull out of the malaise caused by the pandemic." Chris Williamson, Chief Business Economist at IHS Markit said.

Looking at the comments above, one could assume that economic growth is expected to take off this year, supported by a massive $1.9 trillion pandemic relief package and the reopening of nonessential businesses as more people are getting their vaccines. Also President Biden  unveiled details regarding a $2 trillion infrastructure plan which also lifted market sentiment.  But unprecedented fiscal stimulus could make the economy struggle against domestic capacity constraints and rising inflation as the price pressures still remain elevated.