Following sixteen consecutive months of contraction, the Institute for Supply Management released a report on Monday unexpectedly showing modest growth in U.S. manufacturing activity in the month of March.
The ISM said its manufacturing PMI jumped to 50.3 in March from 47.8 in February, with a reading above 50 indicating growth in the sector. Economists had expected the index to inch up to 48.4.
With the much bigger than expected increase, the index returned to expansion territory for the first time since September 2022.
The advance by the headline index partly reflected a significant turnaround by production, as the production index surged to 54.6 in March from 48.4 in February.
The new orders index also returned to expansion territory, climbing to 51.4 in March from 49.2 in the previous month.
The report said the employment index also rose to 47.4 in March from 45.9 in February, although the reading below 50 suggests employment contracted for the sixth month in a row.
Meanwhile, the ISM said the prices index also jumped to 55.8 in March from 52.5 in February, as commodity driven costs remain unstable.
The ISM is scheduled to release a separate report on service sector activity in the month of March on Wednesday. The services PMI is currently expected to come in unchanged after falling to 52.6 in February.