A report from the Institute for Supply Management (ISM) showed on Thursday the U.S. manufacturing sector’s activity expanded more than expected in March.

The ISM's index of manufacturing activity came in at 64.7 percent last month, up 3.9 percentage points from an unrevised February reading of 60.8 percent. The March reading pointed to the fastest expansion in factory activity since December of 1983.

Economists' had forecast the indicator to increase to 61.3 percent.

A reading above 50 percent indicates expansion, while a reading below 50 percent indicates contraction.

According to the report, the New Orders Index stood at 68.0 percent, up 3.2 percentage points from the February reading, while the Production Index came in at 68.1 percent, a climb of 4.9 percentage points compared to the February reading, the Employment Index was at 59.6 percent, 5.2 percentage points higher from the February reading, the Backlog of Orders Index registered 67.5 percent, 3.5 percentage points above the February reading, the Supplier Deliveries Index recorded 76.6 percent, up 4.6 percentage points from the February figure, and the Inventories Index registered 50.8 percent, 1.1 percentage points higher than the February reading. On the price front, the Prices Index posted 85.6 percent, down 0.4 percentage point compared to the February reading.

Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee, noted that the manufacturing economy continued its recovery in March but Survey Committee members reported that their companies and suppliers continue to struggle to meet increasing rates of demand due to COVID-19 impacts limiting availability of parts and materials. “Extended lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are affecting all segments of the manufacturing economy,” he said. “Worker absenteeism, short-term shutdowns due to part shortages, and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential.” Fiore also said that the past relationship between the PMI and the overall economy indicated that the PMI for March (64.7 percent) corresponds to a 6.2-percent increase in real gross domestic product (GDP) on an annualized basis.