ISM Manufacturing Index Contracts for 16th Consecutive Month

The Institute for Supply Management (ISM) manufacturing purchasing managers index (PMI) fell to 47.8 in February from 49.1 in January. The latest figure marks the 16th consecutive month the index has been in contraction territory after a 29-month period of growth dating back to June 2020. The February reading was below the forecast of 49.5.

Here is an excerpt from the latest report:

Fiore continues, “The U.S. manufacturing sector continued to contract (and at a faster rate compared to January), with demand slowing, output easing and inputs remaining accommodative. Demand moderated, with the (1) New Orders Index back in contraction as seasonal headwinds were too strong to overcome, (2) New Export Orders Index returned to expansion and (3) Backlog of Orders Index improving but still in moderate contraction territory. The Customers’ Inventories Index contracted for the third consecutive month, remaining accommodative for future production. Output (measured by the Production and Employment indexes) dropped, with a combined 3.2-percentage point downward impact on the Manufacturing PMI® calculation. Panelists’ companies maintained their production levels month over month, but that growth could not outpace seasonal factors. Head-count reductions continued in February, with notable layoff activity noted. Inputs — defined as supplier deliveries, inventories, prices and imports — continued to accommodate future demand growth but again showed signs of stiffening. The Supplier Deliveries Index improved again, moving into ‘slower’ territory, and the Inventories Index slid back due to inability for growth consistent with seasonal factors, remaining in moderate contraction territory. The Prices Index remained in moderate expansion (or ‘increasing’) territory as commodity driven costs continue to oscillate.