Factories across the world reported surging orders in March as the rollout of Covid-19 vaccines accelerated and the $2tn of public investment announced by the Biden administration lifted confidence in a sustained global recovery.
The likelihood of interest rates remaining at historic lows, and the prospect of consumers unlocking some of the savings from last year in a rapid spending spree also underpinned the strength of the recovery from the shock of the pandemic and sent shares on US and German stock markets to record highs.
The S&P 500 index rallied above the 4,000 level for the first time – led by tech stocks – as investors embraced the US growth outlook, while the Stoxx 600 index of European companies closed 0.67% higher at over 432 points as it continues to close in on its pre-pandemic high set in February 2020.
Germany’s DAX closed at a new record, while in London the FTSE 100 ended 23 points higher at 6,737.
According to a roundup of business surveys from the manufacturing sector, factory output growth hit a 10-year high as new orders and employment all expanded at a more rapid pace.
JP Morgan’s global manufacturing index, which shows activity expanding when readings are above 50, jumped to 55 in March to record its best growth spurt since February 2011.
US factories posted their strongest growth in almost four decades, according to the Institute of Supply Management’s purchasing managers’s index (PMI).
The ISM’s health check showed the Biden bounce, seen in a strong rebound during February, had pushed factory output to accelerate at a blistering pace in March as the PMI jumped to 64.7%, an increase of 3.9 percentage points from the February reading of 60.8%.
Not since December 1983 had the sector expanded at such a strong pace.
Yet it was eurozone that staged the most dramatic recovery, surprising analysts who had expected the stuttering rollout of Covid vaccines across the continent to hold back growth.
Eurozone factories reported the strongest growth in at least 24 years despite what industry analysts said was unprecedented delays to supplies.
IHS Markit said factories across the euro area reported record increases in output, new orders, exports and purchasing activity last month.
This drove Markit’s eurozone PMI up from February’s 57.9 to 62.5, the highest reading since the survey began in June 1997.
Factory sectors in Germany and the Netherlands both recorded their highest ever PMI levels in March, with Austria, Italy and France also seeing rapid growth.
British factories also performed well with the UK’s manufacturing sector accelerating sharply despite the constraint of import holdups at ports after the Brexit deal in December that has restricted access to vital components.
IHS Markit’s PMI for UK manufacturing jumped to a decade-high of 58.9 in March, the fastest monthly growth since February 2011.
Industry bosses told Markit that they had seen stronger order growth from domestic customers and overseas alongside a jump in output.
Business optimism hit a seven-year high, as did employment growth, said IHS Markit.
“Almost two-thirds of manufacturers expect output to rise over the coming year. Only 6% expect a contraction. Jobs growth was also at a seven-year high, supported by the sharpest rise in backlogs of work for 11 years,” it added.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, which helped compile the UK PMI, said rising levels of confidence had “opened the floodgates to new business” in March with “green shoots of recovery popping up across the UK as the global marketplace improved”.
He described manufacturers as “enthusiastic” about the rest of the year, though he warned that “the reality of continued supply chain disruption as a result of Covid, Brexit and now the Suez delays could rein back some of the gains in April”.
Fhaheen Khan, senior economist at Make UK, the manufacturers lobby group, said March’s figures showed the sector still faced huge difficulties.
He said exporters were still struggling to process orders through British ports and much of the improved output was the result of stockpiling to shield against likely import price rises.
Analysts said much of the rise was due to an increase in domestic orders as businesses move through the gears and increased confidence from the vaccine rollout.