February Manufacturing Industry Report: Highest PMI in ‘Nearly 14 Years’
Showing continued overall economy expansion for 106 months in a row, the Institute for Supply Management (ISM) Purchasing Managers Index (PMI) manufacturing index increased 1.7 points to reach 60.8% in February, beating January’s reading of 59.1%. In fact, according to ISM Manufacturing Survey Committee Chair Timothy Fiore, “The PMI® at 60.8 percent is the highest level of expansion seen since May 2004, when it reached 61.4 percent.” And, although it’s been increasing for 18 consecutive months, the manufacturing PMI showed a faster rate of change in February. Will such growth in the sector slow down any time soon? Likely not as manufacturers are optimistic — and many industry indexes show no signs of decreasing any time soon.
In addition to the month’s overall PMI increase, Employment, increasing for the 17th consecutive month, also rose in February as business conditions expanded. While it was already growing in January at 54.2%, the February Employment reading rose 5.5 points, the largest reported change, to reach 59.7%. Supplier Deliveries, too, increased in February, up two points from 59.1% last month to 61.1%, also its 17th month on the rise. Up 4.4 points to register at 56.7% was Inventories, rising from 52.3% in January and growing for the second month in a row. As Raw Materials continued to rise in cost for the 24th month in a row, Prices also increased for the 24th consecutive month, increasing from 72.7% last month to 74.2% in February, a change of 1.5 points.
Through these price increases, however, customer demand appears to remain high while manufacturers continue struggling to meet demand. As such, the Backlog of Orders continued growing for the 13th consecutive month, charging forward in a positive direction. The Backlog of Orders index increased 3.6 points from 56.2% in January to 59.8% in February. In a similar vein, New Export Orders and Imports both continued to increase, experiencing growth for their 24th and 13th consecutive months, respectively. In February, New Export Orders reached 62.8%, up three points from January’s 59.8%, showing increasing demand from other countries, and Imports rose 2.1 points from 58.4% to 60.5%.
With these economic fluctuations, the manufacturing sector also suffered some decreases in February 2018. Decreasing 1.2 points from January’s 65.4%, New Orders came in at 64.2%. As the index remains above 50% and continues its 26-month growth trend, however, New Orders is showing expansion, although it’s growing more slowly. Production followed a similar trend in February. Although it has been growing for 18 months straight, perhaps more slowly because of the slight decrease in New Orders, Production also suffered. Still growing at 62%, Production decreased from January’s 64.5%, a total of 2.5 points. And, as the Production index was still quite high, report respondents look to Production as having driven growing Employment numbers in February. Even with its continued growth and force on the Employment index, the decrease in Production also left Customers’ Inventories too low, having decreased 1.9 points in February and dropping from January’s 45.6 to 43.7, the lowest index in the sector.
With strong numbers in February, marking the industry’s highest levels in nearly 14 years, the sector is set “to exceed current forecasts of 3-3.5%” in the first quarter of 2018. It’s clear that manufacturing is growing — and gaining momentum. With manufacturers’ bright outlooks on expansion and their industry outpacing expectations, the sector appears healthy and strong with a positive future ahead.
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