The outlook for manufacturing in the United States continues to improve, signaling a robust rebound as the post-pandemic economy takes shape. For the seventh consecutive month, the RSM US Manufacturing Outlook Index increased, showing above-normal sentiment.
The index showed the seventh consecutive month of gains in the manufacturing sector.
It’s more evidence that the U.S. manufacturing sector continues to lead the economy out of the depths of the pandemic-induced recession. Despite some concerns around supply and pricing, the outlook for industrial production and domestic manufacturing is clearly going to be one of the major economic narratives for the rest of the year.
The increase in the index presaged improvement in the Institute for Supply Management’s manufacturing index, which advanced to 60.8 in February with production arriving at 63.2, new orders at 64.8 and backlogs at 64, ISM reported this week. Anything over 50 suggests expansion.
All of those readings point to a robust reopening of the U.S. economy.
Amid that strength, prices paid increased to 86 in the ISM survey, which is well above its six-month average of 73.2 and up from 82.1 previously. While we expect an increase in prices as the economy rebounds and year-over-year comparisons drive inflation indices higher, we do not anticipate a permanent increase in the overall level of prices.
The strength in manufacturing also shows up in durable goods orders, which popped above a 6% growth rate in January, the highest since late 2018. Manufacturing sales moved 2% higher over the last three months of the year and are once more approaching normal levels after months of deceleration and decline.
All that goes a long way toward explaining the improving opinions held among the U.S. manufacturing community. The RSM US Manufacturing Outlook Index is approaching one standard deviation above normal, according to our compilation of manufacturing surveys conducted by regional Federal Reserve banks.
The improvement suggests the presence of a sustainable manufacturing recovery that is particularly reassuring, given the months of uncertainty remaining for the service sector.
For more information on how the coronavirus pandemic is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.
