The US manufacturing sector is in its strongest position since 2022, two reports out Monday showed.
The Institute for Supply Management’s manufacturing PMI indicated the manufacturing sector moved into expansion for the first time since September 2022 in March while a measure from S&P Global showed production hit a 22-month high last month as the US economy continues to impress.
The ISM’s manufacturing PMI registered a reading of 50.3 in March, up from February’s reading of 47.8 and higher than the 48.3 economists expected, according to Bloomberg data.
The March reading marks the highest for the index since September 2022 and the first time manufacturing activity has expanded since October 2022. Readings above 50 for this index indicate an expansion in activity while readings below 50 indicate contraction.
“Demand was positive, output strengthened and inputs remained accommodative,” Timothy Fiore, chair of the ISM’s manufacturing business survey committee, said in the company’s release.
Notably, this could be a welcome sign for stocks. An uptick in the manufacturing sector has been highlighted by Wall Street strategists searching for further signs the broadening of the stock market rally has more room to run.
“We see continued signs of a manufacturing upcycle, signaling an end to the third-longest manufacturing downturn in history,” Bank of America US and Canada equity strategist Ohsung Kwon wrote in a note to clients last month.
“Inventory levels are now just back to normal, a re-stocking cycle could be next, and early indicators suggest a manufacturing upcycle ahead. Historically, when the manufacturing PMI has been in expansion, S&P 500 EPS has grown 12% on average on a trailing [12 month] basis.”
Kwon’s team at Bank of America noted this turnaround while boosting its S&P 500 earnings forecast this year to $250 from $235.
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