The Institute for Supply Management (ISM) indicator rose 2.5 points to 50.3 last month.

US manufacturing activity unexpectedly expanded in March for the first time since September 2022, thanks to a sharp rebound in production and increased demand, while input costs rose.

The Institute for Supply Management (ISM) index rose 2.5 points to 50.3 last month, according to data released on Monday. Although just above the 50 level that separates expansion from contraction, it ended 16 consecutive months of contraction in activity.

The March index exceeded all estimates from a most surveys of economists.

Production saw a sharp rebound from the previous month with an increase of 6.2 points, the largest since mid-2020. At 54.6, production growth was the highest since June 2022.

The measure of new orders also returned to expansion territory after contracting in February. The employment index in factories contracted less in March than the previous month.

“Demand remains in the early stages of recovery, with clear signs of improving conditions. Production execution increased compared to January and February, as panelists’ companies return to expansion,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, in a statement.

Nine industries recorded growth in March, led by textile factories, nonmetallic minerals, paper products, and petroleum. Six contracted, including furniture, plastics and rubber products, and electrical equipment.