ISM Report: Manufacturing Activity Expands for Second Straight Month in February
The ISM (Institute for Supply Management) Manufacturing PMI registered 50.3% in February, indicating expansion at a slower rate when compared to January’s 50.9% figure.
“Although the PMI took a step back in February, it increased by four percentage points over the three previous months, with the most recent bump in January finally returning the manufacturing sector to expansion,” says Timothy Fiore, chair of the ISM’s manufacturing business survey committee. “Of the five subindexes that directly factor into the Manufacturing PMI, two (production and supplier deliveries) were in expansion territory, compared to four in January.”
The new orders and employment indexes slipped into contraction territory after expanding in January. New orders dropped 6.5 points to 48.6%, and employment fell 2.7 points to 47.6%. Anything lower than 50% represents contraction.
Although the production index dropped 1.8 points, it managed to stay in expansion territory with a February reading of 50.7%
10 industries reported growth last month:
- 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
- Transportation equipment
Of the six largest manufacturing industries, four (petroleum & coal products; food, beverage & tobacco products; chemical products; and transportation equipment) expanded in February, equaling the number in January,” says Fiore.
The comments of the survey largely echo the supply chain and tariff concerns we saw in last January’s report.
“Customers are pausing on new orders as a result of uncertainty regarding tariffs. There is no clear direction from the administration on how they will be implemented, so it’s harder to project how they will affect business,” writes a respondent in the transportation equipment sector.
An executive in the chemical products industry writes, “The tariff environment regarding products from Mexico and Canada has created uncertainty and volatility among our customers and increased our exposure to retaliatory measures from these countries.”
Even in industries experiencing strong orders, unknown tariff impacts are still causing hesitancy
“New orders continue to be strong after picking up in December. The uncertainty about tariffs keeps us cautious on spending, despite the strong sales right now,” writes an executive from the electrical equipment, appliances & components industry.
