February 2017 Manufacturing ISM Report on Business

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Economic activity in the manufacturing sector expanded in February, and the overall economy grew for the 93rd consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee: “The February PMI® registered 57.7%, an increase of 1.7 percentage points from the January reading of 56%. The New Orders Index registered 65.1%, an increase of 4.7 percentage points from the January reading of 60.4%. The Production Index registered 62.9%, 1.5 percentage points higher than the January reading of 61.4%. The Employment Index registered 54.2%, a decrease of 1.9 percentage points from the January reading of 56.1%. Inventories of raw materials registered 51.5%, an increase of 3 percentage points from the January reading of 48.5%. The Prices Index registered 68% in February, a decrease of 1 percentage point from the January reading of 69%, indicating higher raw materials prices for the 12th consecutive month. Comments from the panel largely indicate strong sales and demand, and reflect a positive view of business conditions with a watchful eye on commodities and the potential for inflation.”

Of the 18 manufacturing industries, 17 reported growth in February in the following order: Textile Mills; Apparel, Leather & Allied Products; Machinery; Computer & Electronic Products; Primary Metals; Plastics & Rubber Products; Nonmetallic Mineral Products; Chemical Products; Paper Products; Fabricated Metal Products; Transportation Equipment; Food, Beverage & Tobacco Products; Wood Products; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Petroleum & Coal Products; and Miscellaneous Manufacturing. The only industry reporting contraction in February is Furniture & Related Products.

February 2017 Manufacturing Index Summaries

PMI

Manufacturing expanded in February as the PMI® registered 57.7%, an increase of 1.7 percentage points from the January reading of 56%, indicating growth in manufacturing for the sixth consecutive month, and is the highest reading since August 2014, when the PMI registered 57.9%. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

A PMI above 43.3%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the February PMI® indicates growth for the 93rd consecutive month in the overall economy and the sixth straight month of growth in the manufacturing sector. Holcomb stated, "The past relationship between the PMI® and the overall economy indicates that the average PMI® for January through February (56.9%) corresponds to a 4.3% increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI® for February (57.7%) is annualized, it corresponds to a 4.5% increase in real GDP annually."

New Orders

ISM’s New Orders Index registered 65.1% in February, which is an increase of 4.7 percentage points when compared to the 60.4% reported for January, indicating growth in new orders for the sixth consecutive month. It is the highest reading since December 2013, when the New Orders Index also registered 65.1%. A New Orders Index above 52.3%, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).

The 16 industries reporting growth in new orders in February — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Machinery; Wood Products; Chemical Products; Computer & Electronic Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Paper Products; Transportation Equipment; Furniture & Related Products; Fabricated Metal Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; and Petroleum & Coal Products. No industry reported a decrease in new orders during February.

Production

ISM’s Production Index registered 62.9% in February, which is an increase of 1.5 percentage points when compared to the 61.4% reported for January, indicating growth in production for the sixth consecutive month. It is the highest reading since March 2011, when the Production Index registered 64.2%. An index above 51.4 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

The 14 industries reporting growth in production during the month of February — listed in order — are: Plastics & Rubber Products; Machinery; Primary Metals; Textile Mills; Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Chemical Products; Transportation Equipment; Paper Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Miscellaneous Manufacturing; and Petroleum & Coal Products. The three industries reporting a decrease in production during February are: Printing & Related Support Activities; Furniture & Related Products; and Electrical Equipment, Appliances & Components.

Employment

ISM’s Employment Index registered 54.2% in February, a decrease of 1.9 percentage points when compared to the January reading of 56.1%, indicating growth in employment in February for the fifth consecutive month. An Employment Index above 50.5%, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Of the 18 manufacturing industries, the 10 reporting employment growth in February — listed in order — are: Textile Mills; Printing & Related Support Activities; Machinery; Computer & Electronic Products; Paper Products; Nonmetallic Mineral Products; Chemical Products; Food, Beverage & Tobacco Products; Petroleum & Coal Products; and Electrical Equipment, Appliances & Components. The five industries reporting a decrease in employment in February are: Furniture & Related Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Transportation Equipment; and Primary Metals.

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in February as the Supplier Deliveries Index registered 54.8 percent, which is 1.2 percentage points higher than the 53.6 percent reported for January. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

The 13 industries reporting slower supplier deliveries in February — listed in order — are: Textile Mills; Machinery; Fabricated Metal Products; Nonmetallic Mineral Products; Chemical Products; Paper Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Petroleum & Coal Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Transportation Equipment; and Food, Beverage & Tobacco Products. The only industry reporting faster supplier deliveries in February is Primary Metals.

Inventories

The Inventories Index registered 51.5 percent in February, which is an increase of 3 percentage points when compared to the 48.5 percent reported for January, indicating raw materials inventories are growing in February for the first time following 19 consecutive months of contraction. An Inventories Index greater than 42.9 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

The nine industries reporting higher inventories in February — listed in order — are: Textile Mills; Apparel, Leather & Allied Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Fabricated Metal Products; Machinery; Transportation Equipment; and Petroleum & Coal Products. The five industries reporting lower inventories in February are: Nonmetallic Mineral Products; Paper Products; Miscellaneous Manufacturing; Chemical Products; and Printing & Related Support Activities.

About Institute for Supply Management

Institute for Supply Management® (ISM®) serves supply management professionals in more than 90 countries. Its 48,000 members around the world manage about $1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM leads the profession through the ISM Report On Business®, its highly regarded certification programs and the newly launched ISM Mastery Model®. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

The full text version of the Manufacturing ISM Report On Business is posted on ISM’s website at www.ismrob.org on the first business day of every month after 10:00 a.m. (ET).