A significant amount of the US manufacturing activity reached to its highest level in more than 37 years in March. This gave a clear indication that a much-anticipated economic boom is probably in progress.
As per the Institute of Supply Management (ISM), there was a growth in national factory activity to 64.7 last month from 60.8 in February. This was the highest jump since December 1983. The institute states that a reading above 50 means that there is an expansion in manufacturing, which accounts for 11.9% of the US economy.
Economists had forecasted that the index would rise to 61.3 in March. Owing to the year-long COVID-19 pandemic, there was a boost in demand for goods as well. Additionally, the White House’s massive $1.9 trillion pandemic relief package and the reopening of non-essential businesses will provide further impetus to economic growth.
With the relief package passed last month, qualified households will receive $1400 checks and an extension of the government safety net for the unemployed through September 6. Households have also accrued around $19 trillion in additional savings, which may lead to excess demand.
President Joe Biden recently revealed a plan to make expenditure of $2 trillion on infrastructure including roads and bridges over 10 years. It is estimated that the first-quarter GDP are as high as a 10.0% annualized rate. The fourth quarter saw a growth in the economy at a pace of 4.3%. This year’s growth could be more than 7%, which would be the fastest since 1984. Last year, the economy contracted 3.5%, which is the worst performance in 74 years.
As per the ISM’s survey, the prices paid by the manufacturers last month was close to its highest since July 2008. In March, its new orders sub-index reached to 68.0 in March. It was the highest reading since January and was also up from 64.8 in February. The order backlogs reduced and the factories also received more export orders.
There are chances of further expansion, and there is fewer inventories with the manufacturers and the clients are less as well. The factories hired more workers in March owing to the robust demand. As per the survey, the manufacturing employment rate grew to 59.6, the highest reading since February.