U.S. manufacturers indicated a renewed slowdown in output and new business growth during February. This contributed to a fall in the seasonally adjusted final Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) to 51.3, down from 52.4 in January.
The headline index was up fractionally from the earlier ‘flash’ estimate in February (51.0), but this was still the second-lowest reading since October 2012. Moreover, the latest reading pointed to one of the weakest improvements in overall business conditions since the recovery began in late-2009.
February data indicated that manufacturing output growth slowed for the third time in the past four months. The latest increase in production was only modest and the weakest recorded since October 2013. Reports from survey respondents suggested that softer new business growth and uncertainty about the economic outlook had acted as a brake on production at their plants.
Volumes of new work increased moderately in February, with the pace of expansion easing to one of the slowest recorded over the past three-and-a-half years. Anecdotal evidence suggested that clients had delayed spending decisions in February amid caution about the business outlook. Additionally, there were further reports citing weak demand from energy sector clients.
Subdued export demand also weighed on new business levels in February. The latest survey pointed to the most marked decline in new orders from abroad since April 2015, which manufacturers partly linked to competitive pressures from the strong dollar.
Softer overall new business growth contributed to a renewed drop in backlogs of work across the manufacturing sector in February. At the same time, employment growth moderated for the second successive month. The latest increase in payroll numbers was only modest, and the weakest recorded since September 2015. A number of firms suggested that the uncertain business outlook had led to more cautious staff hiring patterns at their plants.
Meanwhile, manufacturers indicated a decline in their input buying for the first time since October 2013. This was linked to slower output growth and corresponding efforts to tighten inventories in February. Weaker demand for inputs contributed to a slight improvement in supplier performance.
February data highlighted a reduction in input prices for the sixth consecutive month. Manufacturers mainly commented on lower steel prices and energy costs. Reduced cost burdens and strong competition for new work in turn resulted in the fastest drop in output charges for over three-and-a-half years.
The February PMI® registered 49.5 percent, an increase of 1.3 percentage points from the January reading of 48.2 percent. The New Orders Index registered 51.5 percent, the same reading as in January. The Production Index registered 52.8 percent, 2.6 percentage points higher than the January reading of 50.2 percent. The Employment Index registered 48.5 percent, 2.6 percentage points above the January reading of 45.9 percent. Inventories of raw materials registered 45 percent, an increase of 1.5 percentage points above the January reading of 43.5 percent.
The Prices Index registered 38.5 percent, an increase of 5 percentage points above the January reading of 33.5 percent, indicating lower raw materials prices for the 16th consecutive month. Comments from the panel indicate a more positive view of demand than in January, as 12 of our 18 industries report an increase in new orders, while four industries report a decrease in new orders.
Of the 18 manufacturing industries, nine are reporting growth in February in the following order: Textile Mills; Wood Products; Furniture & Related Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Chemical Products; Primary Metals; and Paper Products. The seven industries reporting contraction in February — listed in order — are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Computer & Electronic Products; Printing & Related Support Activities; Transportation Equipment; Plastics & Rubber Products; and Fabricated Metal Products.
ISM®’s New Orders Index registered 51.5 percent in February, the same percentage as registered in January, indicating growth in new orders for the second consecutive month. A New Orders Index above 52.2 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).
The 12 industries reporting growth in new orders in February — listed in order — are: Textile Mills; Wood Products; Furniture & Related Products; Machinery; Plastics & Rubber Products; Petroleum & Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Primary Metals; Transportation Equipment; Chemical Products; and Fabricated Metal Products. The four industries reporting a decrease in new orders during February are: Apparel, Leather & Allied Products; Paper Products; Electrical Equipment, Appliances & Components; and Computer & Electronic Products.
New Export Orders
ISM®’s New Export Orders Index registered 46.5 percent in February, which is a decrease of 0.5 percentage point when compared to the January reading of 47 percent, and indicates contraction in the New Export Orders index for the second consecutive month.
The five industries reporting growth in new export orders in February are: Primary Metals; Printing & Related Support Activities; Miscellaneous Manufacturing; Machinery; and Fabricated Metal Products. The seven industries reporting a decrease in new export orders during February — listed in order — are: Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Paper Products; Computer & Electronic Products; Plastics & Rubber Products; and Transportation Equipment. Six industries reported no change in export orders in February compared to January.