ISM Report: Manufacturing Activity Expands for Second Straight Month in February

The ISM (Institute for Supply Management) Manufacturing PMI remained in expansion territory in February, registering 52.4%. This decrease of only 0.2 percentage points from January’s 52.6% indicates growth at a slower rate.

“Of the five subindexes that directly factor into the Manufacturing PMI, three (new orders, production and supplier deliveries) are in expansion territory, the same as in January. The employment and inventories indexes stayed in contraction, though both improved compared to January,” says Susan Spence, chair of the ISM’s manufacturing business survey committee. A reading below 50% represents contraction.

The February new orders and production indexes fell to 55.8% and 53.5%, respectively, which signals growth at a slower rate compared to January. The employment index is contracting at a slower rate, gaining 0.7 percentage points for a February reading of 48.8%.

“Three demand indicators (the new orders, backlog of orders and new export orders indexes) are in expansion, and the customers’ inventories index remains in ‘too low’ territory, contracting at a slightly slower rate. A ‘too low’ status for the customers’ inventories index is usually considered positive for future production,” says Spence.

12 manufacturing industries reported growth last month:

• Printing & related support activities
• Textile mills
• Primary metals
• Nonmetallic mineral products
• Chemical products
• Machinery
• Electrical equipment, appliances & components
• Fabricated metal products
• Transportation equipment
• Plastics & rubber products
• Miscellaneous manufacturing
• Computer & electronic products

“Of the six largest manufacturing industries, four (chemical products; machinery; transportation equipment; and computer & electronic products) expanded in February,” says Spence.

Respondents in the survey’s comments show a wide range of business conditions. Executives in some sectors are still heavily focused on negative impacts from tariff volatility, while executives in other sectors report steady and improving business.

“Business is improving by the week. Backlog is growing, and new opportunities are everywhere. Monthly shipments are still lower than planned, but improving,” writes a respondent in the fabricated metal products industry. “Over the past five years, we spent thousands trying to attract new employees and had almost zero responses. In the last six months, however, we’ve been able to hire experienced engineers, computer numerical control (CNC) operators and young people wanting to become CNC machinists.”

Another respondent in the machinery sector writes, “So far this year, tariff instability still exists. Due to the tariffs, most raw materials used in manufacturing, such as steel and wire, need to be sourced domestically, and the cost keeps going up.”