ISM: PMI Expands, Manufacturing on the Upswing

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The PMI report, issued by The Institute for Supply Management, showed that manufacturing expanded in February, as the PMI registered 54.2 percent, a decrease of 2.4 percentage points from the January reading of 56.6 percent, indicating growth in manufacturing for the 30th consecutive month.

Timothy Fiore, chair of the Institute for Supply Management Manufacturing Business Survey Committee, expresses optimism about the direction of manufacturing, adding, “Another six months as similar levels would be great.” Fiore says after a rough few months, the manufacturing sector appears to be hitting its stride.

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New Orders and Production

Fiore comments that new orders was strong in February, registering 55.5 percent in February, which is a decrease of 2.7 percentage points when compared to the 58.2 percent reported for January. This indicates growth in new orders for the 38th consecutive month.

The Production Index registered 54.8 percent in February, which is a decrease of 5.7 percentage points when compared to the 60.5 percent reported for January, indicating growth in production for the 30th consecutive month.

Fiore explains, “We lost 5.7 points on production, but you have to consider that February only has 28 days, which means fewer manufacturing days. And even though we try to account for that, this will still affect production numbers.”

He indicates also that the severe weather experience by much of the country this past month caused a number of factory shutdowns that most likely contributed to the Production Index’s weaker expansion performance.  

Employment and Inventories

The Employment Index registered 52.3 percent in February, a decrease of 3.2 percentage points when compared to the January reading of 55.5 percent, indicating growth in employment in February for the 29th consecutive month. “Employment continued to expand, but at the lowest level since November 2016, when the index registered 51.6 percent,” says Fiore.

The Inventories Index registered 53.4 percent in February, an increase of 0.6 percentage point from the 52.8 percent reported for January.

Prices, Exports, and Imports

Prices Index registered 49.4 percent in February, a decrease of 0.2 percentage point from the January reading of 49.6 percent, indicating a decrease in raw materials prices for the second straight month.

“Decreases were reported in aluminum, steel, steel-based products, various chemicals, and plastic resins,” Fiore comments.

“Steel prices have returned to more normal levels, which is significant because I have always thought that steel prices are a good indicator for the rest of the manufacturing industry,” he adds.

New Export Orders Index registered 52.8 percent in February, 1 percentage point higher compared to the January reading of 51.8 percent.

Imports Index registered 55.3 percent in February, an increase of 1.5 percentage points when compared to the 53.8 percent reported for January, indicating growth for the 25th consecutive month.

“Imports have been at historical lows for the past 5 months, but we had a 1 percentage point gain this month, which I’m happy to see.”

The monthly Manufacturing ISM Report on Business is based on the survey results of approximately 350 professionals across 18 different industry sectors. The report is released on the first business day of each month and features the PMI Index as its key measure. For more information on the Institute for Supply Management, visit www.ism.ws.

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