The US manufacturing sector expanded last month for the first time since September 2022, according to industry data published Monday, with positive demand and strong output helping to snap 16 straight months of contraction.
The data underscores the enduring strength of the US economy despite elevated interest rates, which is good news for Joe Biden as he seeks to talk up his record ahead of the November presidential election.
But it also highlights the challenges the US Federal Reserve now faces as it debates when to start cutting interest rates in a way that doesn't cause a fresh surge in inflation.
The Institute for Supply Management (ISM) said its manufacturing index hit 50.3 percent last month, pushing it above the 50-point mark that separates expansion from contraction.
This was sharply above February's figure of 47.8 percent, and was also higher than market expectations of continued contraction, according to Briefing.com.
"Demand was positive, output strengthened and inputs remained accommodative," ISM survey chief Timothy Fiore said in a statement explaining why the manufacturing sector returned to growth.
"Demand remains at the early stages of recovery, with clear signs of improving conditions," he continued, adding that production execution had surged in comparison to January and February.
"Suppliers continue to have capacity but are showing signs of struggling, due in large part to their raw material supply chains," he said.
Four of the six largest manufacturing industries, including food, beverage and tobacco products, registered growth in March, according to Fiore, helping to push the overall economy into its 47th straight month of expansion.
Meanwhile, the ISM's services index decelerated slightly last month, while continuing its expansion for a 14th consecutive month.