Economic activity in the manufacturing sector contracted for the 16th consecutive month, with the PMI down 1.3 points in February (47.8%) from January (49.1%). The downturn is largely due to seasonal factors, according to Timothy Fiore, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.
“The U.S. manufacturing sector continued to contract (and at a faster rate compared to January), with demand slowing, output easing and inputs remaining accommodative,” Fiore said in a report published Friday.
Citing seasonal headwinds, ISM found New Orders in contraction territory at 49.2% after registering 52.5% in January. However, demand seems to be in the early stages of recovery.
“Panelists’ comments reflected sentiment about improving demand, a trend that began in December 2023. Indications of order softness were at the lowest level since April 2023,” Fiore said.
Production in February (48.4%) was down 2 points from January (50.4%). Though production levels were maintained month over month, ISM reported that growth could not outpace seasonal factors.
“Overall, production rates have been essentially stable since July 2023, with slight month-over-month declines consistent with reductions in demand and backlog,” Fiore noted.
The Prices Index was relatively unchanged in February (52.5%), down 0.4 points compared to January (52.9%). Backlog of Orders (46.3%) registered a 1.6-point increase, and Employment (45.9%) was down 1.2 percentage points.
“The New Export Orders Index reading of 51.6% is 6.4 percentage points higher than January’s figure of 45.2%. The Imports Index continued in expansion territory, registering 53%, 2.9 percentage points higher than the 50.1% reported in January. Both indexes reported their highest readings since July 2022, when the New Export Orders Index registered 52.6 percent and the Imports Index 54.4 percent,” Fiore said.
Of the six biggest manufacturing industries, Fabricated Metal Products; Chemical Products; and Transportation Equipment registered growth in February. The eight manufacturing industries reporting growth in February in order are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Primary Metals; Plastics & Rubber Products; Fabricated Metal Products; Chemical Products; Miscellaneous Manufacturing; and Transportation Equipment.
The index is based on a survey of executives in 18 industries. The PMI is considered a leading economic indicator and a barometer of where manufacturing is headed. An index reading above 50% indicates economic expansion, while below 50% shows contraction.
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