Manufacturing in U.S. Kept Expanding at Robust Pace in March

(Bloomberg) -- America's factories continued to expand in March at a robust pace, demonstrating momentum in an industry that struggled for the better part of the last two years, Institute for Supply Management data showed Monday.

Key Points

• ISM's diffusion index eased to 57.2 (matching median forecast) from February's 57.7, which was the highest since August 2014; readings above 50 indicate growth
• Measure of orders cooled to 64.5 in March from 65.1
• Factory employment gauge climbed to 58.9, the strongest reading since June 2011, from 54.2
• Prices-paid index increased to 70.5, the highest since May 2011, from 68

Big Picture

The manufacturing index, which has increased in six of the last seven months, underscores building optimism among factory managers that's also emerged from Asia to Europe. In the U.S., the ISM measure of export orders climbed to the highest level since November 2013, indicating improving global demand.

Recent Chinese government figures showed a factory purchasing managers index climbed in March to the highest level since April 2012, while a Markit Economics measure of euro-area manufacturing was the strongest in 71 months.

The ISM's indexes of inventories continued to contract in March, a sign production gains will hold up after Federal Reserve factory output data showed the strongest back-to-back advances in almost three years. The highest order backlogs and slowest delivery times for suppliers since 2014 help explain why more manufacturers are reporting that they are adding workers to assembly lines.

The recent pickup in manufacturing has been a bright spot for the U.S. economy during a first quarter otherwise marked by tepid gains in household spending, the biggest part of gross domestic product. President Donald Trump on Friday touted a National Association of Manufacturers survey showing optimism among members was at a 20-year high.

Other Details

• ISM's production gauge cooled to a four-month low of 57.6 from 62.9, which was the best reading since March 2011
• Seventeen of 18 manufacturing industries reported expansion in March, led by electrical equipment and appliances
• Sixteen of 18 industries reported paying higher raw material costs; there were no commodities reported down in price
• Gauge of supplier deliveries rose to 55.9 in March, the highest since December 2014, from 54.8
• Measure of order backlogs climbed to 57.5, the best reading in three years, from 57
• Customer inventories gauge fell to 47, matching the second-lowest since July 2015, from 47.5

--With assistance from Patricia Laya Kristy Scheuble and Michelle Jamrisko

To contact the reporter on this story: Vince Golle in Washington at vgolle@bloomberg.net.

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Vince Golle