Reports of manufacturing’s death – or at least its grave illness – appear to have been greatly exaggerated.
The Institute for Supply Management said Thursday in its widely watched reading on the health of the manufacturing industry that its PMI index improved to 52.3 in February, from 49.3 in January.
The results are likely to alleviate concerns that the U.S. manufacturing sector has entered a prolonged period of softness. Readings above 50 suggest the industry is expanding, while readings below 50 suggest contraction.
“February proved to be a good month in the manufacturing sector as new orders, production and employment contributed to a solid growth scenario,” said Norbert Ore, chair of the ISM Manufacturing Business Survey Committee. “The inventories index showed significant reduction in manufacturers’ inventories for the second consecutive month, and the backlog of orders index is growing once again.”
The ISM said it new orders index – seen by many as the lifeline of the manufacturing industry – expanded to 54.9 from 50.3 in January. The production index rose to 54.1 from 49.6, the employment index grew to 51.1 from 49.5, and the backlog index improved to 51.5 from 43.5.
Among some of the comments from survey respondents:
- “Business is booming in the fertilizer business.” (Chemical Products)
- “Business continues to be strong but flat.” (Fabricated Metals Products)
- “Although our business is still depressed, we are seeing increased order activity fir single pieces of equipment compared to complete system solutions as in the past.” (Machinery)
In recent days, some experts have suggested that the manufacturing industry was headed for a recession, based in part on slower housing starts and signs of a general economic slowdown. Today’s report from the ISM suggests otherwise.
“The trend in manufacturing, as well as the overall economy, is for slow but continuing growth,” Ore said.Daniel Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI, agreed that the February report offers an encouraging first look at industrial activity in February. "The reported increase in February production activity suggests that the recent weakness was most likely an adjustment period to excessive inventory accumulation and declining demand in a few major markets, like housing and motor vehicles, and not a systemic weakening," he said.