The 2020 Mid-Year Economic Update_long

Economic Activity in the Manufacturing Sector Grew in February

The overall economy grew for the 130th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

Economic activity in the manufacturing sector grew in February, and the overall economy grew for the 130th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Manment Manufacturing Business Survey Committee: "The February PMI registered 50.1%, down 0.8% from the January reading of 50.9%. The New Orders Index registered 49.8%, a decrease of 2.2% from the January reading of 52%. The Production Index registered 50.3%, down 4%compared to the January reading of 54.3%. The Backlog of Orders Index registered 50.3%, an increase of 4.6%compared to the January reading of 45.7%. The Employment Index registered 46.9%, an increase of 0.3% from the January reading of 46.6%. The Supplier Deliveries Index registered 57.3%, up 4.4% from the January reading of 52.9%. The Inventories Index registered 46.5%, 2.3% lower than the January reading of 48.8%. The Prices Index registered 45.9%, down 7.4%as compared to the January reading of 53.3%. The New Export Orders Index registered 51.2%, a decrease of 2.1% as compared to the January reading of 53.3%. The Imports Index registered 42.6%, an 8.7% decrease from the January reading of 51.3%.

"Comments from the panel were generally positive, with sentiment cautious compared to January. The PMI® remained in expansion territory, but at a weak level. Demand slumped, with (1) the New Orders Index contracting at a weak level, despite new export order expansion, (2) the Customers' Inventories Index remaining at 'too low' status and (3) the Backlog of Orders Index expanding for the first time in several months, but at a slow rate. Consumption (measured by the Production and Employment indexes) contributed negatively (a combined 3.7% decrease) to the PMI® calculation. Inputs — expressed as supplier deliveries, inventories and imports — strengthened in February, due primarily to supplier deliveries expanding, offset partially by inventories declining. Despite imports contraction returning at a strong rate, inputs contributed positively to the PMI® calculation, a reversal from the previous month. (The Supplier Deliveries and Inventories indexes directly factor into the PMI®; the Imports Index does not.) Prices returned to contraction, at moderately strong levels.

"Global supply chains are impacting most, if not all, of the manufacturing industry sectors. Among the six big industry sectors, Food, Bever & Tobacco Products remains the strongest, followed by Computer & Electronic Products. Petroleum & Coal Products is the weakest. Overall, sentiment this month is marginally positive regarding near-term growth," says Fiore.

Of the 18 manufacturing industries, the 14 that reported growth in February — listed in order — are: Wood Products; Furniture & Related Products; Plastics & Rubber Products; Printing & Related Support Activities; Paper Products; Textile Mills; Primary Metals; Food, Bever & Tobacco Products; Computer & Electronic Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Machinery; and Chemical Products. The three industries reporting contraction in February are: Petroleum & Coal Products; Transportation Equipment; and Nonmetallic Mineral Products.

WHAT RESPONDENTS ARE SAYING

  • "There are always supply chain challenges with Lunar New Year shutdowns, and this year is no different. Coronavirus is wreaking havoc on the electronics industry. Companies are delayed in starting up production, which is resulting in longer lead times, constraints and increased pricing. It's a mad dash to dual source stateside in case China isn't back online soon." (Computer & Electronic Products) 
  • "January started out strong, but the effects of the virus in China [and] the continued grounding of the 737 Max have suppressed new orders. We are still expected to be flat to slightly up [year-over-year] for 2020 sales, based on those issues." (Chemical Products) 
  • "Layoffs are here." (Transportation Equipment) 
  • "Coronavirus and its impact on the supply chain: We will see some softness in demand, but also [experience] havoc on items sourced from China that may cause significant delays to production." (Food, Bever & Tobacco Products) 
  • "Energy markets seem to be responding to a potential drop in demand that may be related to responses [to] the coronavirus." (Petroleum & Coal Products) 
  • "Coronavirus continues to be front and center as a major supply chain risk to our company. Access to information in China — from our supply base and customers — is slow to come by." (Fabricated Metal Products) 
  • "Sales continue to be strong, with the supply base able to support as required. The major concern is the China virus and what that crisis could affect in getting parts. The company is putting plans in place to source out locations, especially in the U.S., for parts." (Machinery) 
  • "Business continues to be strong. We had a little January slowdown, but February has been fantastic." (Plastics & Rubber Products) 
  • "We have seen an increase of sales for our products." (Furniture & Related Products) 
  • "Current favorable forecast to budget for first-quarter sales." (Primary Metals)
  •  
About the Author
Leave a Reply

Leave a Comment

Sign Up for the MDM Update Newsletter

The MDM update newsletter is your best source for news and trends in the wholesale distribution industry.

By subscribing, you are agreeing to MDM’s Privacy Policy.

2

articles left

Want more Premium content from MDM?

Subscribe today and get:

  • New issues twice each month
  • Unlimited access to mdm.com, including 10+ years of archived data
  • Current trends analysis, market data and economic updates
  • Discounts on select store products and events

0

articles left

This is your last free article

Subscribe to MDM Premium today and get:

  • Unlimited access to MDM.com
  • 1 year digital subscription, with new issues twice a month
  • Trends analysis, market data and quarterly economic updates
  • Deals on select store products and events

1

article
left

You have one free article remaining

Subscribe to MDM Premium to get unlimited access. Your subscription includes:

  • Two new issues a month
  • Access to 10+ years of archived data on mdm.com
  • Quarterly economic updates, trends analysis and market data
  • Store and event discounts

To continue reading, you must be an MDM Premium subscriber.