In a welcome, but moderate show of strength this morning, the Institute for Supply Management (ISM), the Arizona-based trade group, has reported that its index of U.S. manufacturing activity had ticked up in February, coming in at a reading of 53.2. That was better than not only the January figure of 51.3 and the expected survey result for February of 52.5, but was a welcome result especially as the horrid winter has played havoc with so many economic issuances to date.
In all, this was the ninth consecutive month in which this survey result had shown an increase in such activity across the country. On a total basis, the U.S. economy has grown for 57 months in a row. It should be noted that a survey result in excess of 50 suggests that the industrial sector is expanding. The companion report, on the non-manufacturing sector, also to be issued by the ISM, will be out on Wednesday morning.
Looking at the various components making up this report, we find that month-to-month increases were noted in new orders (54.5 in February versus 51.2 in January), in supplier deliveries (58.5 vs. 54.3), in inventories (52.5 vs. 44.0), and in backlogs (52.0 vs. 48.0). Interestingly, employment was flat at 52.3 in both months, while exports ticked a bit lower (54.5 versus 53.5). Moreover, production tumbled in February, going from 54.8 to a reading of 48.2, which signals some contraction in this category. This latter weakness might well have been attributable to the weather-related disruption running across the country.
As to observations from sales representatives in the various industries followed by the ISM, we see such comments higher than normal demand being seen in the transportation industry, while it was a very strong month in the computer and electronics industries. However, in chemical products, respondents noted that there were many raw materials disruptions due to the weather and back-ups at the ports.
Looking at the entire report, it was a reassuring issuance, with the February survey being more or less in line with the average reading for the past year of 53.8. That average was part of a range from 50.0 in April and May of last year to 56.5 in December.At the time of this article's writing, the author did not have positions in any of the companies mentioned.