Purchasing managers report reflects a fragile expansion.
The Institute for Supply Management reported that its purchasing managers index (PMI) for February was 52.4%, down 1.7% from January's reading of 54.1% and lower than analysts had expected.
Despite the weaker number, the PMI was above 50, which indicates expansion, and represents the 31st consecutive month of growth in the manufacturing sector.
New orders also registered growth with a reading of 54.9%, though this was lower than January's reading of 57.6%.
The Prices Index registered 61.5% as the prices of raw materials increased for the second consecutive month.
"As was the case in January, new orders, production and employment all grew in February -- although at somewhat slower rates than in January," noted Bradley J. Holcomb, chair of ISM's Manufacturing Business Survey Committee. Holcomb said comments from purchasing managers "continue to reflect a generally positive outlook for the next few months."
In February, 11 of the 18 manufacturing industries reported growth. In order of growth, they were:
- Leather & Allied Products;
- Machinery; Primary Metals;
- Transportation Equipment;
- Petroleum & Coal Products;
- Fabricated Metal Products;
- Paper Products; Computer & Electronic Products;
- Food, Beverage & Tobacco Products;
- Miscellaneous Manufacturing; and
- Chemical Products.
Four industries reported contraction in February: Furniture & Related Products; Nonmetallic Mineral Products; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components.
The decline in the PMI comes on the heels of a durable goods report for January that was also lower than expected, noted Chad Moutray, chief economist for the National Association of Manufacturers. "Both of these measures differ from the current narrative that manufacturing activity has begun to recover, with positive expectations for growth ahead," he said.
Moutray pointed out that while growth in new orders and production slipped, export growth expanded at a faster rate.
He said the numbers reflect that "higher energy and raw material costs and developments in Europe are weighing on respondents' minds."
"Most of us were anticipating that the PMI would rise to 55.0, reflecting stronger manufacturing growth. Instead, it pulled back a little, reversing three consecutive months of gains," Moutray said. "New orders led the decline lower, but hopefully, this is more of a 'blip' and the longer-term trend returns to being positive with March's readings."