U.S. manufacturing activity expanded in February to a level not seen since May of 2004, according to a new report released this morning by the Institute for Supply Management (ISM).
According to the ISM’s survey of purchase executives, U.S. factory activity climbed 1.7 percentage points and now stands at a robust 60.8% (any reading over 50 indicates expansion, according to the ISM’s metrics).
February’s increase represents the nation’s 18th straight month of growth in the manufacturing sector, and the overall economy has expanded for a 106th consecutive month.
Fifteen of the eighteen industries surveyed by the ISM reported growth, led by printing and related support activities; primary metals; machinery; computer & electronics products; petroleum & coal products; and nonmetallic mineral products.
Just two sectors reported contraction: apparel, leather & allied products; as well as furniture/related products
U.S. manufacturing starts out year strong
The ISM’s February survey points to continued strength in the nation’s industrial sector, with strong growth in new orders, production, and employment. The nation’s fourth quarter GDP was revised up to 2.5%, while the Labor Department reported U.S. employers added 200,000 new jobs for the month of January – with 15,000 new jobs created in the manufacturing sector.
All of this corresponds with IndustryNet’s February reports, including some strong growth numbers for the state of Kentucky, as well as in structural steel fabrication and metal finishing.
Mixed reports
After surging 2.9% in December, durable goods orders eased back 3.7% in January, as demand for transportation equipment plunged 10%. This corresponds with recent IndustryNet reports on the auto industry’s slowdown in states like Ohio and Tennessee, which show waning employment in that sector over the past year.
U.S. supply executives express optimism, but skills gap looms
Responses from the nation’s supply executives across the U.S. generally reflect optimism about the future, particularly in light of the tax reform. One executive in the machinery sector noted “It seems the tax break for business is making a difference. Customers are spending more for capital equipment.”
Another responded “We expect to have a strong year in 2018. In expectation, we have added to our sales staff and plan on adding to our production staff.”
However, a widening skills gap continues to plague many of the nation’s manufacturers, with one business responding “Employment is one of our biggest challenges. No labor available.”
Despite the difficulty in finding skilled workers, the employment index was the star of this month’s survey, with the ISM reporting a 5.5% increase in its Employment Index. This is the 17th consecutive month that the index has grown, as manufacturers ramped up hiring to keep up with production demands.
Eleven of the eighteen industries reported growth in employment, with printing & related support activities; petroleum and coal products; primary metals; machinery; and computer/electronic products leading growth.
Notably, strength in manufacturing employment was seen across the board, with no industries reporting a labor contraction.
New orders, production continue on expansion – but at a slower rate.
After easing back 2 percentage points in January, the ISM’s New Orders Index inched down again in February, slipping 1.2% to 64.2.
Although the rate has slowed, the index is well into expansion territory, and has been for a solid 10 months – generally at 60 or above.
December’s New Orders reading, for instance, reached 69.4, marking the index’s highest level since 2004.
According to the ISM, fifteen out of eighteen industries reported an increase in new orders, with textile mills; paper products; printing & related support activities; primary metals; and chemical products leading the way.
The apparel, leather & allied products industry was the only to report a contraction in new orders.
Industrial production also inched down, with February’s reading at 62%, down 2.5% from January. Although production is now in its 18th straight month of expansion, manufacturers are having a slightly harder time keeping up with demand as new orders increase and the labor market tightens.
Fourteen of eighteen industries reported higher production in February, and were strongest in printing/related support industries; primary metals; petroleum & coal products; and plastics & rubber products.
Just two industries reported a decline in production: apparel, leather & allied products; and furniture/related products.
The Manufacturing ISM® Report On Business® is based on data compiled from purchasing and supply executives nationwide at the Institute for Supply Management (ISM).
