WASHINGTON (Reuters) – U.S. manufacturing activity rose to a three-year high in February amid acceleration of new orders, but factories continued to incur higher costs for raw materials and other imports as the pandemic progressed. onwards.
The Institute for Supply Management (ISM) said Monday that its index of national factory activity went back to a reading of 60.8 last month from 58.7 in January. That was the highest level since February 2018.
A reading above 50 indicates an expansion in manufacturing, which accounts for 11.9% of the U.S. economy. Economists surveyed by Reuters had forecast the index to rise to 58.9 in February.
The increase was despite a shortage of global semiconductor chips, which have damaged production at automotive plants.
The survey added to hard data in January on consumer spending, building permits, factory production and home sales by suggesting the economy got off to a strong start in the first quarter, thanks to nearly $ 900 billion in additional COVID-19 relief money from the government. and reductions in new coronavirus infections and hospitals.
But the year-round pandemic has disrupted the supply chain, raising production costs for manufacturers. The survey of manufacturers’ price surveys jumped to a reading of 86.0, the highest level since July 2008, from 82.1 in January.
This follows data from last month showing an increase in inflation expectations close to the consumer term, and responds to comments that inflation will accelerate in the coming months. Economists, however, are divided on whether or not the expected spike in price pressures will be temporary.
U.S. Treasury yields have skyrocketed, with investors promising that a well-matched monetary and fiscal policy will support inflation. Federal Reserve Chairman Jerome Powell has played those fears, announcing three decades of lower and more stable prices.
There is also ample potential in the labor market, with at least 19 million people on unemployment benefits. But home-based Americans with COVID-19 have accumulated too many savings, which could provide powerful support for consumption.
Manufacturing is driven by strong demand for goods, such as electronics and furniture, with 23.2% of the workforce working from home due to the virus. However, demand could shift back to services in the summer as more Americans receive the vaccine, and manufacturing activity slows from normal levels.
ISM’s new advanced orders subscale increased to a reading of 64.8 last month from 61.1 in January. Factories also received more export orders and backup orders transferred. As a result, factories halted hiring last month.
The survey’s manufacturing earnings measure rose to 54.4, the highest reading since March 2019, from 52.6 in January.
That offers cautious optimism that employment growth slowed last month after nonfarm payrolls rose just 49,000 jobs in January. The economy has recovered 12.3 million of the 22.2 million jobs lost through the pandemic.
Reciting with Lucia Mutikani; Edited by Chizu Nomiyama