For the second month in a row, manufacturers’ optimism surged in April, which implies further acceleration in overall industrial production and manufacturing conditions.
This is also the second consecutive month that the RSM US Manufacturing Outlook Index stood at least 2 standard deviations above neutral, which signifies a statistically significant increase in sentiment among manufacturers.
As our analysis shows, this is a rare event that in all likelihood signals the economy has entered the early phases of recovery and is quickly headed into expansion.
Surveys carried out by five regional central banks reported increasing or positive levels of manufacturing conditions. Only the Texas Manufacturing Outlook Survey, which still remained higher than would normally be expected, slipped lower because of a decrease in capacity utilization.
There is real data to back up manufacturers’ sentiment. Orders for durable goods increased by 25% relative to March 2020. Although that increase is inflated relative to the first month of the economic collapse, the more relevant number is that orders in March 2021 are 4% higher than February 2020, the month before the collapse.
We are anticipating the domestic economy to continue to expand as vaccinations overcome the spread of the coronavirus both in the United States and among trading partners.
We could expect the high level of manufacturing confidence to be sustained, with the potential for stimulus spending to push confidence to even higher levels.
For more information on how the coronavirus pandemic is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.