The case for expecting trouble for the US economy looks a bit weaker in light of today’s update on manufacturing activity in March. Markit’s flash estimate of its purchasing managers index (PMI) for this cyclically sensitive sector ticked higher for this month. Score one for the optimists who say that the recent run of soft numbers is only a temporary affair born of a harsh winter.
The theory that spring will revive forward momentum certainly got a boost today. The US Manufacturing PMI rose modestly to 55.3 for March vs. 55.1 in the previous month — well above the neutral 50.0 mark that separates growth from contraction. Yes, it’s a slight increase, but the main message is that moderate growth remains intact, “with output, new business and employment all rising at an accelerated pace in March,” according to Markit’s press release. “Higher levels of employment have now been recorded for 21 months in a row, and the latest increase was the fastest since last November.”
Let’s not forget that the US economy has hit some turbulence recently, as the recently downgraded estimates for first-quarter GDP suggest. The soft patch is also conspicuous in last month’s deceleration in growth via the Chicago Fed National Activity Index. But courtesy of today’s report from Markit, it’s a bit harder to argue that the latest wobbles are turning into something darker. True, the March economic profile is still largely a mystery, and so the guessing game about what happens next has a long way to go for deciding if February’s stumble is a one-time affair. Today’s release is but one clue, but we’re off to an mildly encouraging start.
“While economic growth looks set to disappoint again in the first quarter, with GDP set to rise by a rate perhaps slightly below the 2.2% expansion seen in the fourth quarter of last year,” notes Chris Williamson, Markit’s chief economist, “the upturn in [manufacturing’s] order books in particular gives some reassurance that the pace of economic growth is likely to pick up as we move towards the summer.”