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Strong US Manufacturing Data Show Supply-Chain Pressures

by Jay Brahach | April 1, 2021

The Institute for Supply Management’s (ISM) Manufacturing PMI for March released this morning measured in at 64.7, beating the consensus forecast by 3.2 points and suggesting the manufacturing sector across the US is recovering strongly.

This represents a 3.9-point increase from the headline figure in February. Of the 18 industries participating in the survey, 17 recorded growth in March and the six largest manufacturing industries all reported much stronger growth than expected.

The trade weighted dollar Index (DXY) remained lower on the session after the release.

The New Orders Index strengthened 3.2 points in March, and the employment index jumped 5.2 points, indicating the recovery of the manufacturing sector is moving in the right direction. This was also reflected in an increased ratio of optimal panel sentiment across all those who participated in the survey. From a demand perspective, things are looking strong.

However, the headline figure can be misleading, and does not point to the pressures which are still very real in the space. The Suppliers Deliveries Index jumped 4.6 points in March, with a higher number representing slower delivery times. This is the highest reported figure since the end of the oil crisis in 1974.

The effects of the pandemic were compounded by the impact of the February winter storm in the US, particularly in industries such as chemical products, which have a strong presence in Texas.

The Prices Index also increased for the tenth month in a row, which is not surprising given the impacts for supply chains. Input goods are becoming scarcer, giving increased pricing powers to suppliers. Prices overall are at the highest levels since the financial crisis in 2008, with all 18 industries reporting increased price pressures; steel, petroleum, coal, plastic and rubber were all impacted.

Overall, the narrative across the US manufacturing sector has been pretty consistent in the last three months. The demand for goods is still increasing, but the realities of production throughout the pandemic cannot be avoided. The backlog of orders is at the highest levels since 1993, and employee absenteeism is still causing concern.

Jay Brahach
Account Executive & Currency Analyst

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