Manufacturing activity this month hit a three-year high, while other reports showed healthy increases in where the economy is headed over the next several months.
U.S. manufacturers experienced a robust and accelerated improvement in their overall business conditions in March, as the IHS Markit Flash U.S. Manufacturing Purchasing Managers’ Index rose to a reading of 55.7, from 55.3 in February. A reading above 50 indicates expansion.
The gauge signaled the strongest upturn in manufacturing operating conditions since March 2015. Stronger contributions from the employment, inventories and suppliers’ delivery times components helped to lift the headline reading.
The latest data also pointed to robust rises in manufacturing production and new orders, although in both cases the rates of expansion eased since February.
Also, input buying increased at the fastest pace since September 2014, which a number of survey respondents linked to pre-purchasing and stock-building ahead of expected raw material price rises, particularly steel-related items. A number of survey respondents cited higher prices for metals and increased charges by suppliers amid strong demand for raw materials.
The findings are part of a larger report that includes a look at the services industry. The IHS Markit Flash U.S. Composite PMI Output Index declined slightly to a reading of 54.3 this month from 55.8 in February.
“The Flash PMI surveys indicate that the economy likely continued to expand at a robust pace in March, rounding off a solid opening quarter of the year,” said Chris Williamson, chief business economist at IHS Markit. “The surveys are running at a level consistent with annualized first quarter gross domestic product growth approaching 2.5%, though we note that official GDP estimates may once again understate growth in the opening quarter of the year.”
He said the survey found average prices charged for goods and services are rising at one of the strongest rates seen since 2014. Also with factory costs showing the largest jump for seven years amid growing shortages of key inputs, inflationary pressures appear to be on the rise.
Leading Indicators up Third Month in a Row
The Conference Board, a private research group, reported its Leading Economic Index rose 0.6% in February to a level of 108.7, increasing for the third straight month, following a 0.8% increase in January and a 0.7% increase in December.
The LEI uses 10 key economic metrics, including manufacturers' new orders, stock prices, and average weekly unemployment claims, for the composite reading.
“The U.S. LEI rose again, despite a sharp downturn in stock markets and weakness in housing construction in February,” said Ataman Ozyildirim, director of business cycles and growth research at The Conference Board. “The LEI points to robust economic growth throughout 2018. Its six-month growth rate has not been this high since the first quarter of 2011.”
He said while the Federal Reserve is on track to continue raising its benchmark rate for the rest of the year, "the recent weakness in residential construction and stock prices, important leading indicators, should be monitored closely.”
Existing Home Sale Recover Following 2-Month Drop
Despite consistently low inventory levels and faster price growth, existing-home sales recovered in February after two straight months of declines, according to the National Association of Realtors.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, grew 3% to a seasonally adjusted annual rate of 5.54 million in February. After last month’s increase, sales are now 1.1% above a year ago.
“A big jump in existing sales in the South and West last month helped the housing market recover from a two-month sales slump,” said Lawrence Yun, NAR chief economist, “The very healthy U.S. economy and labor market are creating a sizeable interest in buying a home in early 2018. However, even as seasonal inventory gains helped boost sales last month, home prices, especially in the West, shot up considerably. Affordability continues to be a pressing issue, because new and existing housing supply is still severely subpar.”
According to Yun, the unseasonably cold weather that started the year muted pending sales in the Northeast and Midwest in January and ultimately led to their sales retreat last month.
“Looking ahead, several markets in the Northeast will likely see even more temporary disruptions from the large winter storms that have occurred in March,” he said.
Follow @HDTrucking on Twitter