ISM Manufacturing Is Giant, Screaming Fireball

ISM manufacturing was expected to come in hot for March. And it did.

The market was looking for 61.5, a print that would have represented another scorcher. Instead, ISM printed 64.7 (figure below), the highest in almost four decades.

The range, from nearly six-dozen economists, was 59.4 to 65. So, the actual read essentially matched the most optimistic guess.

“This is the highest reading since December 1983 (69.9%),” the accompanying color said. “Prior to that, the Manufacturing PMI registered 66% in November 1983.”

All five subindexes which factor into the headline rose compared to February.

Markets were keen to get a fresh read on price pressures and associated supply chain issues. The prices paid gauge did fall in March, but only to 85.6 (from 86 in February). For those wondering, 85.6 is the second highest read on prices paid since the summer of 2008 (figure below).

Products scarcity was reported in… well, in almost everything, for lack of a more formalized, academic way to put it. Prices rose for aluminum, copper, chemicals, plastics, wood, lumber, transportation and “all varieties of steel.”

Supplier deliveries hit the highest since April of 1974, which ISM helpfully noted marked “the end of the oil crisis.” Readings above 50 represent slower deliveries. “Suppliers continue to struggle to deliver,” ISM Chair Timothy Fiore said, noting that “transportation challenges and challenges in supplier-labor markets are still constraining production growth — and to a greater extent compared to February.”

The survey also betrayed ongoing supplier difficulties due to the pandemic, which are now colliding with “strong growth in economic activity.” Needless to say, that economic activity is likely to get stronger still in the months ahead.

The customer inventories gauge printed a series low 29.9. Out of 18 industries, none reported higher customers’ inventories for last month.

If you’re wondering what this presages for growth, Fiore noted that “the past relationship between the Manufacturing PMI and the overall economy indicates that [March’s print] corresponds to a 6.2% increase in real GDP on an annualized basis.”

We’re in uncharted territory here. With just a few exceptions, there’s no historical precedent for any of this.