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Economic activity in the manufacturing sector indicated growth in February, ending 18 consecutive months of decline. The overall economy grew for the fourth consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Businessﾮ
The report was issued today by Norbert J. Ore, C.P.M., chair of the Institute for Supply Managementﾙ Manufacturing Business Survey Committee and group director, strategic sourcing and procurement, Georgia-Pacific Corporation. "February signals the turnaround for manufacturing based on a strong PMI reading and an accelerating trend in new orders and production. Most of the indexes are heading in the right direction at this point. Employment is still soft, but it is a lagging indicator and will need a number of months of growth before it recovers. Pricing power is still lagging, but should begin to develop if the trends in new orders and production continue."
ISM's Backlog of Orders Index indicates that order backlogs grew for the first time after 21 months of decline. ISM's Supplier Deliveries Index reflects slower deliveries for the second consecutive month. Manufacturing employment continued to decline in February as the index fell below the breakeven point (an index of 50 percent) for the 17th consecutive month. ISM's Prices Index remained below 50 percent as manufacturers experienced lower prices for the 12th consecutive month. New Export Orders grew in February for the second consecutive month. February's Imports Index decelerated slightly, but registered growth for the third consecutive month. Comments from supply executives fell into two groups this month. One group continued to express concerns with regard to business conditions, while the other indicated that things are starting to improve.
ISM's PMI is 54.7 percent in February, an increase of 4.8 percentage points from the 49.9 percent reported in January. ISM's New Orders Index rose from 55.3 percent in January to 62.8 percent in February. ISM's Production Index rose 9.2 percentage points from 52 percent in January to 61.2 percent in February. The ISM Employment Index is at 43.8 percent for February, an increase of 1.2 percentage points when compared to the 42.6 percent reported in January.
ISM's Supplier Deliveries Index rose to 52.3 percent from 51.7 percent in January. ISM's Inventories Index is 39.5 percent. ISM's Customer Inventories Index declined slightly to 41.5 percent from January's 43.5 percent indicating a faster rate of inventory liquidation when compared to January. ISM's Prices Index in February is 41.5 percent, a decrease of 2.4 percentage points from January's 43.9 percent. ISM's Backlog of Orders Index rose from 44.5 percent in January to 53 percent in February.
ISM's New Export Orders Index registered 51.1 percent, up 0.3 percentage point from January's 50.8 percent. Imports of materials by manufacturers grew, as ISM's Imports Index is 52 percent for the month, down from January's 52.1 percent.
"The overall picture shows growth in manufacturing activity during the month of February," added Ore. "The PMI hasn't been above the 50 mark since July 2000, so this is certainly welcome news. Manufacturing has struggled and hopefully this signals the beginning of a strong recovery. It is encouraging that 13 industries reported growth in new orders. It appears that the inventory liquidation is nearing completion as customers' inventories are quite low. Upward movement of prices for aluminum, copper, nickel, and steel give credibility to the development of pricing power in some industries as we head toward the second quarter."
Of the 20 industries in the manufacturing sector, 14 industries reported growth: Wood & Wood Products; Primary Metals; Fabricated Metals; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Rubber & Plastic Products; Tobacco; Leather; Chemicals; Transportation & Equipment; Glass, Stone & Aggregate; Food; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; and Printing & Publishing.
"There were no reports of commodities in short supply. Commodities reported up in price are: Aluminum, Copper, Nickel, and Steel. The commodities reported down in price are: Caustic Soda, Chemicals, Corrugated Containers, Natural Gas, High Density Polyethylene, Resins, and Steel," Ore stated.