United States: ISM manufacturing index hits near 14-year high in February
March 1, 2018
Manufacturing conditions in the U.S. economy remained solid in February, with the Institute for Supply Management (ISM) manufacturing index rising to 60.8 from 59.1 in January. February’s increase contrasted the drop to 58.6 that market analysts had expected and marked the highest reading in nearly 14 years. Consequently, the index now lies further above the 50-point threshold that separates expansion from contraction in the U.S. manufacturing sector.
February’s print reflected a continuation of the robust pace of growth in production and new orders, although both eased slightly from January, and a faster expansion in backlogs of orders, with the index increasing to the highest level in nearly seven years. Due to higher production demand, inventories accumulated throughout the month and the pace of hiring accelerated markedly, with the employment index recording the biggest month-on-month jump among the components of the manufacturing index, increasing 5.5 points in February to 59.7. In addition, export orders, supported by strong global economic conditions, recorded the fastest pace of growth since April 2011. Meanwhile, supplier delivery times continued to increase, and input cost inflation rose to a near seven-year high in February, signaling the accumulation of stress in the supply chain to meet production targets.
All things considered, the report indicated that the robust momentum in the U.S. manufacturing sector continues and does not show signs of meaningful deceleration in the near term. Solid global demand and recent tax breaks for businesses should continue aiding manufacturing activity, contributing to a positive growth outlook for the economy as a whole in 2018.
Author: Javier Colato, Economist