Manufacturing PMI dips in February

The U.S. manufacturing sector continued to expand in February, but at a slower pace than in several previous months.

The monthly IHS Markit U.S. Manufacturing Purchasing Managers’ Index (PMI) shows a softer, but still solid, improvement in operating conditions across the sector. The headline PMI slipped to its lowest since August 2017 as output and new orders slowed.

The seasonally adjusted IHS Markit final PMI posted 53 in February, down from 54.9 in January. Production increased at a slower pace in February, with panelists reporting that the upturn stemmed from a sustained expansion in new business and efforts to clear backlogs.

“The PMI indicates the U.S. manufacturing sector is growing at its weakest rate for one and a half years, with firms reporting a marked easing in production growth in February, linked to a similar slowdown in order book growth,” said IHS Markit Chief Business Economist Chris Williamson. “The survey exhibits a strong advance correlation with comparable official data and suggests that factory production and orders growth rates are close to stalling midway through the first quarter, albeit in part representing some pay-back after a strong January.”

New business expanded at a slower rate last month, the weakest upturn since June 2017. Some firms noted that longer lead times were pushing clients to find alternatives. Foreign client demand continued to increase, panelists said.

The increase in purchasing prices was sharp in February, IHS reported, reflecting higher raw material costs and tariffs. Job creation was brisk in February, with firms raising their workforce numbers solidly.

The one-year output expectations remained positive last month. Panelists were buoyed by forecasts of further upturns in new business.

Separately, the Institute for Supply Management (ISM) issued its February Report on Business, showing similar manufacturing trends.

The February PMI registered 54.2 percent, a decrease of 2.4 percentage points from January. New orders were 55.5 percent, compared with January’s reading of 58.2 percent. The employment index was 52.3 percent, a 3.2 percentage point decrease from January.

The prices index registered 49.4 percent, down 0.2 percentage points from January.

“Comments from the panel reflect continued expanding business strength, supported by notable demand and output, although both were softer than the prior month,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey committee.

ISM noted that February marked the 118th consecutive month of manufacturing sector expansion. Sixteen of the 18 manufacturing industries reported growth last month.

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