The U.S. Institute for Supply Management Index (formerly NAPM) index came in at an impressive 55.6 for March.

The index beat the previous month’s reading of 54.7 and the market consensus of 54.5. This was the second consecutive monthly increase in the index which is now well above the critical level of 50, notes RBC Financial. BMO Nesbitt Burns says that the reading topped the consensus and “represents a solid reason to believe the economy is fully out of the woods”.

The ISM prices-paid component also jumped above 50. “No real broad inflation pressure is implied yet, but we have long said that ISM prices is the better indicator of Fed policy. So, this is another reason to be on alert for rate hikes by mid-year,” notes BMO. “This ISM index is ahead of the curve compared with other indicators such as factory hiring, production, shipments, and orders. That is perfectly normal since ISM is a leading indicator and, of the bunch, ISM is as reliable as any.”

“All told, today’s numbers add to the mounting evidence that the manufacturing sector is well along the recovery trail,” says TD Bank.

“We believe the U.S. ISM index is telling us that the inventory correction has run its course for the most part and that the official government data for manufacturing will shortly see an upturn,” concludes BMO.