Manufacturing sector growth accelerates in February

Economic activity in the manufacturing sector rose at a faster rate in February, from the previous month, amid strong demand and waning pandemic-related impacts, according to the Institute for Supply Management (ISM).

The ISM released Tuesday (March 1) the February Manufacturing ISM Report On Business that shows the Purchasing Managers’ Index (PMI) rose by 1 percentage point to 58.6%, from January. A PMI above 50% indicates the manufacturing economy is expanding.

In February, new orders, production and employment increased. Supplier deliveries slowed at a faster rate. The backlog of orders rose, and raw material inventories increased. Customers’ inventories remain too low. Prices rose for the 21^st consecutive month, but the rate of increase was slightly slower. Exports and imports increased as well.

“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee. “The COVID-19 omicron variant remained an impact in February; however, there were signs of relief, with recovery expected in March. A higher-than-normal quits rate and early retirements continued. Panel sentiment remained strongly optimistic, with 12 positive growth comments for every cautious comment, up from January’s ratio of 7-to-1.”

Fiore noted that panelists’ ability to hire employees continues to improve but to a lesser degree than in January.

The following manufacturing industries reported moderate-to-strong growth in February: transportation equipment; machinery; computer and electronic products; food, beverage and tobacco products; chemical products; and petroleum and coal products.

“Manufacturing performed well for the 21st straight month, with demand registering month-over-month growth and consumption softening slightly, though less than forecast,” Fiore said. “The impact of omicron declined in February as swiftly as it appeared in December, leaving March and April’s manufacturing environment favorable, especially with new orders and backlogs registering strong growth.”

Respondents from multiple industries reported strong demand coupled with higher prices and supply chain issues. In the computer and electronics products industry, a respondent said the “electronic supply chain is still a mess.” A respondent in the chemical products industry reported “strong sales growth as retail continues to return.”

In the machinery industry, a respondent said “we have seen year-over-year revenue growth of about 10% due to markets coming back. However, in the automotive area, the microchip shortage is causing slowness in growth.”