ISM Data Shows Marginal Expansion in US Manufacturing Sector as New Orders Contract and Prices Increase

Economic activity in the manufacturing sector grew for the second consecutive month in February, following 26 months of contraction, according to the latest Manufacturing ISM Report on Business. The Manufacturing PMI stood at 50.3 percent in February, a 0.6 percentage point decrease from January’s 50.9 percent. 

Demand weakened, with the New Orders Index dropping back into contraction territory after three months of expansion, registering 48.6 percent—6.5 percentage points lower than in January. The New Export Orders Index reading of 51.4 percent is 1 percentage point lower than the January reading, while the Backlog of Orders Index was up 1.9 percentage points compared with the 44.9 percent recorded in January.

The February reading of the Production Index (50.7 percent) is 1.8 percentage points lower than January’s figure, but the index expanded for the second month in a row after eight months in contraction. The Prices Index surged 7.5 percentage points compared with the January reading; an increase attributed to pending tariffs. The Employment Index registered 47.6 percent, down 2.7 percentage points from January’s figure.

The Imports Index continued in expansion in February, registering 52.6 percent, 1.5 percentage points higher than January’s reading.

24 percent of manufacturing gross domestic product (GDP) contracted in February, down from 43 percent in January. The 10 manufacturing industries reporting growth in February—listed in order—are: Petroleum & Coal Products; Miscellaneous Manufacturing; Primary Metals; Wood Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Chemical Products; Plastics & Rubber Products; Fabricated Metal Products; and Transportation Equipment. The five industries reporting contraction in February are: Furniture & Related Products; Textile Mills; Nonmetallic Mineral Products; Computer & Electronic Products; and Machinery.

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