Continuing Expansion in U.S. Manufacturing Sector

March 6, 2013

On Friday March 1, the Tempe, Arizona-based Institute for Supply Management (ISM) released its February Report on Business® for the Manufacturing sector.

The report points to a third consecutive month of expansion among the nation’s manufacturers, and that growth took place within an overall economy that has now clocked gains in each of the last 45 months.

ISM’s Purchasing Managers Index (PMI™), which ISM calculates from monthly surveys of private-sector enterprises, stood at 54.2% for February, an increase of 1.1% over January’s 53.1%.  February marked not only a 12-month high for the index, but the highest PMI™level since June 2011.

In addition to proprietary PMI™ calculations, ISM bases its monthly assessment on benchmarks for new orders, production, employment, prices, backlogs, and other metrics, each of which logged measureable growth last month.

“The New Orders Index registered 57.8%, an increase of 4.5% over January’s reading of 53.3%, indicating growth in new orders for the second consecutive month,” said the Chair of ISM’s Business Survey Committee, Bradley J. Holcomb.  “As was the case in January, all five of the PMI™’s component indexes—New Orders, Production, Employment, Supplier Deliveries, and Inventories—registered in positive territory in February. In addition, the Backlog of Orders, Exports, and Imports indexes all grew in February relative to January.”

Of the 18 manufacturing industries surveyed by ISM, 15 reported growth in February, including several that play an important role here in Southeastern Pennsylvania: electrical equipment, plastics & rubber products, fabricated metal products, food, and machinery.  Chemical products was one noteworthy industry that reported contraction last month.

Markit, meanwhile, whose independent Markit U.S. Manufacturing PMI™ offers a convenient counterpoint to the ISM assessment, reported that February witnessed the strongest rise in manufacturing output for nearly a year. Although the Markit PMI™ dropped slightly from January’s 55.8, its current level of 54.3 it is well above the growth threshold of 50.

When releasing the data, Markit Chief Economist Chris Williamson stated that “The manufacturing sector…looks to be on course to expand at a robust quarterly rate of approximately 2.0% in the first quarter.”  Markit recorded increasing output across each of its primary market groups, with “particularly sharp” gains among those manufacturing consumer and intermediate goods.

Projecting the ISM’s findings through the remainder of 2013, the report states that placing an average of January and February’s (53.6%) within the larger economic growth trend corresponds to a 3.6% annualized increase in real Gross Domestic Product (GDP).