Manufacturing Economic Activity Grows in March Amid Growing Demand



Economic activity in the manufacturing sector grew in February, with the overall economy achieving a 21st consecutive month of growth, according to the latest Manufacturing ISM Report on Business from the Institute for Supply Management.

“The February Manufacturing PMI registered 58.6%, an increase of one percentage point from the January reading of 57.6%. This figure indicates expansion in the overall economy for the 21st month in a row after a contraction in April and May 2020,” Timothy R. Fiore, CPSM, CPM, chair of the ISM’s manufacturing business survey committee, said. “The New Orders Index registered 61.7%, up 3.8 percentage points compared to the January reading of 57.9%. The Production Index registered 58.5%, an increase of 0.7 percentage point compared to the January reading of 57.8%. The Prices Index registered 75.6%, down 0.5 percentage point compared to the January figure of 76.1%. The Backlog of Orders Index registered 65%, 8.6 percentage points higher than the January reading of 56.4%. The Employment Index registered 52.9%, 1.6 percentage points lower than the January reading of 54.5%. The Supplier Deliveries Index registered 66.1%, an increase of 1.5 percentage points compared to the January figure of 64.6%. The Inventories Index registered 53.6%, 0.4 percentage point higher than the January reading of 53.2%. The New Export Orders Index registered 57.1%, up 3.4 percentage points compared to the January reading of 53.7%. The Imports Index registered 55.4%, a 0.3-percentage point increase from the January reading of 55.1%.

“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment. The COVID-19 omicron variant remained an impact in February; however, there were signs of relief, with recovery expected in March. A higher-than-normal quits rate and early retirements continued. Panel sentiment remained strongly optimistic, with 12 positive growth comments for every cautious comment, up from January’s ratio of seven-to-one. Demand expanded, with the (1) New Orders Index increasing and remaining in strong growth territory, supported by stronger expansion of new export orders, (2) Customers’ Inventories Index remaining at a very low level and (3) Backlog of Orders Index increasing to historically high levels.

“Consumption (measured by the Production and Employment indexes) grew during the period, though at a slower rate, with a combined minus-0.9-percentage point change to the Manufacturing PMI calculation. The Employment Index expanded for a sixth straight month; panelists indicate their ability to hire continues to improve but to a lesser degree than in January. Challenges with turnover (quits and retirements) and resulting backfilling continue to plague panelists’ efforts to adequately staff their organizations. Production expanded satisfactorily despite staffing and supplier delivery headwinds. Inputs — expressed as supplier deliveries, inventories and imports — continued to constrain production expansion. The Supplier Deliveries Index again slowed at a slightly faster rate, while the Inventories and Imports indexes increased, both at slightly faster rates. In February, the Prices Index increased for the 21st consecutive month, at a slightly slower rate.

“All of the six biggest manufacturing industries — transportation equipment; machinery; computer and electronic products; food, beverage and tobacco products; chemical products; and petroleum and coal products, in that order — registered moderate-to-strong growth in February.

“Manufacturing performed well for the 21st straight month, with demand registering month-over-month growth and consumption softening slightly, though less than forecast. The impact of omicron declined in February as swiftly as it appeared in December, leaving March and April’s manufacturing environment favorable, especially with new orders and backlogs registering strong growth.”

Sixteen manufacturing industries reported growth in February, while only one industry reported a decrease (wood products).

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