Economic activity continues to expand in the manufacturing sector. According to the latest Manufacturing ISM® Report On Business®, manufacturing activity expanded in February, and the overall economy grew for the 106th consecutive month. The Institute for Supply Management® (ISM) surveys the nation’s supply executives each month.
The ISM manufacturing index jumped to 60.8 in February, up from the 59.1 reading recorded in January. Economists had projected manufacturing growth to slip to 58.7 in February. However, the index exceed expectations.
A reading above 50 for the index indicates expansion in the manufacturing sector, and a reading below 50 signals contraction.
“The February PMI® registered 60.8 percent, an increase of 1.7 percentage points from the January reading of 59.1 percent. The New Orders Index registered 64.2 percent, a decrease of 1.2 percentage points from the January reading of 65.4 percent,” said Timothy R. Fiore, CPSM, C.P.M., Chair of the ISM Manufacturing Business Survey Committee. “The Production Index registered 62 percent, a 2.5 percentage point decrease compared to the January reading of 64.5 percent. The Employment Index registered 59.7 percent, an increase of 5.5 percentage points from the January reading of 54.2 percent. The Supplier Deliveries Index registered 61.1 percent, a 2 percentage point increase from the January reading of 59.1 percent.”
“The Inventories Index registered 56.7 percent, an increase of 4.4 percentage points from the January reading of 52.3 percent. The Prices Index registered 74.2 percent in February, a 1.5 percentage point increase from the January reading of 72.7 percent, indicating higher raw materials prices for the 24th consecutive month. Comments from the panel reflect expanding business conditions, with new orders and production maintaining high levels of expansion; employment expanding at a faster rate to support production; order backlogs expanding at a faster rate; and export orders and imports continuing to grow faster in February” Fiore added. “Supplier deliveries continued to slow (improving) at a faster rate. Price increases occurred across most industry sectors. The Customers’ Inventories Index indicates levels remain too low. Capital expenditure lead times improved by five days while production material supplier lead times extended four days during the month of February.”
Of the 18 manufacturing industries, 15 reported growth in February, in the following order: Printing & Related Support Activities; Primary Metals; Machinery; Computer & Electronic Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Fabricated Metal Products; Chemical Products; Transportation Equipment; Textile Mills; Miscellaneous Manufacturing; Paper Products; Electrical Equipment, Appliances & Components; and Food, Beverage & Tobacco Products. Two industries reported contraction during the period: Apparel, Leather & Allied Products; and Furniture & Related Products.
WHAT RESPONDENTS ARE SAYING…
“Availability of electronic components, long lead times, allocations and constraints continue to wreak havoc in the purchasing cycle, with no end in sight at this time.” (Computer & Electronic Products)
“Our business saw [an] increase in fourth quarter, and it continued in January 2018. CapEx purchase deliveries are moving out globally.” (Chemical Products)
“Labor market continues to be tight for supply chain talent in the Southern California area. Overall economy is strong.” (Transportation Equipment)
“Employment is one of our biggest challenges. No labor available.” (Food, Beverage & Tobacco Products)
“Steel market is doing rather well. Everybody is out of what I need.” (Fabricated Metal Products)
“It seems the tax break for business is making a difference. Customers are spending more for capital equipment.” (Machinery)
“Hiring has picked up for direct-hire employees. Due to end-of-2017 performance and improvement in commodity price, there has been an increase in capital budget.” (Petroleum & Coal Products)
“Business is very strong, and our lines are running at full capacity.” (Plastics & Rubber Products)
“We expect to have a strong year in 2018. In expectation, we have added to our sales staff and plan on adding to our production staff.” (Miscellaneous Manufacturing)
“The weakening U.S. dollar in relationship to the yuan is starting to impact importing cost. We are starting to see more supplier price increases.” (Electrical Equipment, Appliances & Components)