- ISM factory index declined 1.3 points in February to 47.8
- New orders, production and employment measures decreased
A measure of US factory activity shrank at a faster pace in February as orders, production and employment contracted, suggesting manufacturing is struggling for momentum.
The Institute for Supply Management’s manufacturing gauge fell 1.3 points to 47.8 last month from a 15-month high in January, according to data released Friday. A level below 50 indicates shrinking activity, and the figure was weaker than all but one estimate in a Bloomberg survey of economists.
Demand softened in February after the largest monthly advance in new orders in more than three years. Measures of production and factory employment both dropped to the lowest levels since July.
The latest figures are a setback for the nation’s purchasing and supply management executives who have been optimistic that US manufacturing is on the cusp of expanding after being stuck in contraction territory since late 2022.
“Demand is at the early stages of recovery, and production execution is relatively stable compared to January, as panelists’ companies begin to prepare for expansion,” Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement.
“Suppliers continue to have capacity but are showing signs of struggling, due in part to their raw material supply chains,” he said.
Eight manufacturing industries reported growth last month, led by apparel, nonmetallic mineral products and primary metals. Seven reported contracting activity, including furniture, machinery and wood products.
Fiore said he feels fairly confident about manufacturing reaching expansion territory in March or April after 16 months of contraction.
“Everything feels like it’s heading in the right direction,” Fiore said on a call with reporters. “The first half is going to be a bit bumpy, and this is one of those bumps.”
The ISM data also showed factory inventories contracted at a faster rate last month than at the start of the year, indicating firms are keeping stockpiles lean. A measure of customer inventories also shrank, though at a slower pace.
The group’s index of prices paid for materials showed costs rose at a slower pace.
Select ISM Industry Comments
“The start of 2024 looks good. Sales are above expectations, and costs are mostly stable. A few commodities are up in cost due to supply shortages.” – Chemical Products
“The commercial vehicle market appears to be retracting a bit in 2024 compared to last year.” – Transportation Equipment
“Business continues to stabilize. Cash flow will be tight in 2024.” – Food, Beverage & Tobacco Products
“US economic outlook is affecting customer orders, and the current backlog is quite low compared to past quarters.” – Computer & Electronic Products
“We expect to see steady sales going forward, if the (Federal Reserve) continues to hold rates and suggests a rate cut in the future.” – Machinery
“Currently, orders are positive in our automotive OEM and automotive aftermarket business. Our industrial business sector is looking weak at the moment.” – Fabricated Metals
“Demand continues to be slow. Reduction from the second half of 2023 has continued into this year. We are adjusting production to match demand.” – Electrical Equipment & Appliances
“Remarkable slowdown in business in December. January has picked up, but not to previous-year levels.” – Textile Mills
Meanwhile, orders from overseas customers and imports both expanded in February.
Written by: Mark Niquette — With assistance from Chris Middleton @Bloomberg
The post “US Manufacturing Gauge Drops as Industry Struggles for Momentum” first appeared on Bloomberg