American manufacturing has been taking it on the chin lately. In fact, many analysts have noted that based on data readings the sector could be in its own version of a recession.
But after months of dismal news, March brought some much-needed good signs according to JP Morgan economist Jesse Edgerton.
“With this morning’s ISM release, we have now seen all seven of the manufacturing surveys that we follow post an improvement in March,” wrote Edgerton in a note Friday.
All of the regional Federal Reserve manufacturing surveys were up, from Philadelphia to New York to the much maligned Dallas region. And with today’s ISM and Markit surveys, that caps off a serious improvement for the month.
The ISM survey moved above 50, meaning the sector is expanding, for the first time since September.
The one negative is the data coming from Friday’s jobs report, which showed the largest decline in manufacturing employment since December 2009. This, however, is only a symptom of the way the data is gathered, according to Edgerton as the surveys are forward-looking while the employment report is for the preceding month.
Additionally, it appears that two of the biggest problems for the sector are finally disappearing.
“The improvement in the forward-looking surveys suggests that the recent rebound in oil prices and decline in the dollar may be starting to improve the outlook for the manufacturing sector,” said Edgerton.
A huge reason for the declines in the manufacturing sector has been the dollar. This makes American-made products harder to sell elsewhere and takes a hit on bottom-lines. But recent alleviation of this pressure means that producers may be a bit more cheery.
In fact, the responses from suppliers in the ISM report reflect this mood.
“Incoming sales are improving,” said one respondent. “Requests for proposals for new equipment [are] very strong,” said another.
This sort of dip and bounce back isn’t unprecedented, contraction in the ISM survey has happened outside of recession a number of times, most recently in 2003. There is still a ways to go, and to be fair this is just one month, but with other parts of the economy staying relatively strong, a rebound may be on the way.