February 2014 ISM Manufacturing Survey At High End Of Expectations

 

 

The ISM Manufacturing survey for February 2014 indicated moderate manufacturing expansion. The New Orders sub-index which historically correlates to the economy improved even more significantly than the prime index.

The ISM Manufacturing survey index (PMI) improved from 51.3 to 53.2 (50 separates manufacturing contraction and expansion). This was at the high end of expectations which were 49.5 to 53.2 (consensus 51.9).

This index had been in a general downtrend since mid 2011. This is the ninth month of expansion. The regional Fed manufacturing surveys were mixed in indicating growth in February, and now the ISM indicates manufacturing shows expansion in February.

Relatively deep penetration of this index below 50 has normally resulted in a recession.

The noisy Backlog of Orders improved from 48.0 to 52.0 – showing growth. Backlog growth is an indicator of improving conditions; a number below 50 indicates contraction. Backlog accuracy does not have a high correlation against actual data.

Economic activity in the manufacturing sector expanded in February for the ninth consecutive month, and the overall economy grew for the 57th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

“The February PMI® registered 53.2 percent, an increase of 1.9 percentage points from January’s reading of 51.3 percent indicating expansion in manufacturing for the ninth consecutive month. The New Orders Index registered 54.5 percent, an increase of 3.3 percentage points from January’s reading of 51.2 percent. The Production Index registered 48.2 percent, a decrease of 6.6 percentage points compared to January’s reading of 54.8 percent. Inventories of raw materials increased by 8.5 percentage points to 52.5 percent. As in January, several comments from the panel mention adverse weather conditions as a factor impacting their businesses in February. Other comments reflect optimism in terms of demand and growth in the near term.”

Of the 18 manufacturing industries, 14 are reporting growth in February in the following order: Textile Mills; Wood Products; Machinery; Printing & Related Support Activities; Plastics & Rubber Products; Nonmetallic Mineral Products; Transportation Equipment; Paper Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Furniture & Related Products; Primary Metals; and Chemical Products. The three industries reporting contraction in February are: Apparel, Leather & Allied Products; Petroleum & Coal Products; and Miscellaneous Manufacturing.