The US manufacturing sector experienced growth for the first time in 1-1/2 years in March. This growth was attributed to a rebound in production and an increase in new orders. However, employment at factories remained subdued due to significant layoff activity and rising prices for raw materials.

The Institute for Supply Management (ISM) survey indicated that the sector was on the path to recovery, although risks remained from escalating raw material prices. The ISM’s manufacturing PMI rose to 50.3 last month, the highest reading since September 2022. This marked the end of a 16-month contraction in manufacturing.

While the rebound in manufacturing is positive for the economy, concerns about inflation were raised as prices for inputs increased. The survey also showed that factory employment continued to decline, with businesses resorting to layoffs and other measures to trim headcounts.

Despite the overall positive trend in manufacturing, construction spending saw a decline in February. Single-family homebuilding remained strong, but weakness in nonresidential and public projects offset this growth. Economists had predicted a rebound in construction spending, but the sector experienced a 0.3% decrease.

Overall, the US manufacturing sector’s recovery is seen as a positive sign for the economy, although challenges such as rising raw material prices and subdued employment continue to pose risks.


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