Economic activity in the manufacturing sector expanded in February for the second straight month but only the third time in 40 months, say the nation’s supply executives in the latest ISM Manufacturing PMI Report.
The report was issued by Susan Spence, MBA, chair of the Institute for Supply Management (ISM) manufacturing business survey committee.
“The Manufacturing PMI registered 52.4% in February, a 0.2-percentage point decrease compared to the reading of 52.6 in January. The overall economy continued in expansion for the 16th month. (A Manufacturing PMI above 47.5%, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index expanded for the second straight month after four straight readings in contraction, registering 55.8%, down 1.3 percentage points compared to January’s figure of 57.1%. The February reading of the Production Index (53.5%) is 2.4 percentage points lower than January’s reading of 55.9%. The Prices Index remained in expansion (or ‘increasing’ territory), registering 70.5%, an 11.5-percentage point jump from January’s reading of 59% and its highest reading since June 2022 (78.5%). The Backlog of Orders Index registered 56.6%, up 5 percentage points compared to the 51.6% recorded in January and its highest reading since May 2022 (58.7%). The Employment Index registered 48.8%, up 0.7 percentage point from January’s figure of 48.1%,” Spence said. “The Supplier Deliveries Index indicated a further slowing for the third month in a row after one month in ‘faster’ territory. The reading of 55.1% is up 0.7 percentage point from the 54.4% recorded in January. (Supplier Deliveries is the only ISM PMI Reports index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Inventories Index registered 48.8%, up 1.2 percentage points compared to January’s reading of 47.6%. The Customers’ Inventories Index reading of 38.8% is a 0.1-percentage point increase compared to January.
Spence added, “The New Export Orders Index reading of 50.3% is 0.1 percentage point higher than the reading of 50.2% registered in January. The Imports Index registered 54.9%, 4.9 percentage points higher than January’s reading of 50% and the highest since February 2022 (55.4%). In February, U.S. manufacturing activity remained in expansion territory, although growing at a slower pace than the month before. Of the five subindexes that make up the PMI, two (New Orders and Production) indicated slower growth compared to the previous month, and the Employment and Inventories indexes remained in contraction.”
Spence continued, “Three demand indicators (the New Orders, Backlog of Orders and New Export Orders indexes) are in expansion, and the Customers’ Inventories Index remains in ‘too low’ territory, contracting at a slightly slower rate. A ‘too low’ status for the Customers’ Inventories Index is usually considered positive for future production. Regarding output, the Production Index is in expansion for the fourth month in a row, and the Employment Index, though still in contraction, improved by 0.7-percentage point. However, 45% of panelists still indicate that managing head counts is the norm at their companies as opposed to hiring.”
Spence concluded, “Finally, inputs (defined as supplier deliveries, inventories, prices and imports) all increased since the previous month’s reading. The Supplier Deliveries Index indicated slower deliveries, Inventories Index contraction has slowed, and the Prices Index took a huge leap to 70.5% from 59% in January. Looking at the manufacturing economy, 21% of the sector’s gross domestic product (GDP) contracted in February, compared to 20% in January, and the percentage of manufacturing GDP in strong contraction (defined as a composite PMI of 45% or lower) decreased to 1%, compared to 12% in January. The share of sector GDP with a PMI at or below 45% is a good metric to gauge overall manufacturing weakness. Of the six largest manufacturing industries, four (Chemical Products; Machinery; Transportation Equipment; and Computer & Electronic Products) expanded in February.”
The 12 manufacturing industries reporting growth in February — listed in order — are:
- Printing & Related Support Activities
- Textile Mills
- Primary Metals
- Nonmetallic Mineral Products
- Chemical Products
- Machinery
- Electrical Equipment
- Appliances & Components
- Fabricated Metal Products
- Transportation Equipment
- Plastics & Rubber Products
- Miscellaneous Manufacturing
- Computer & Electronic Products
The five industries reporting contraction in February are:
- Apparel, Leather & Allied Products
- Furniture & Related Products
- Petroleum & Coal Products
- Wood Products
- Food, Beverage & Tobacco Products
