U.S. manufacturing activity expands more than forecast in February - ISM

A report from the Institute for Supply Management (ISM) showed on Monday the U.S. manufacturing sector’s activity expanded more than expected in February.

The ISM's index of manufacturing activity came in at 60.8 percent last month, up 2.1 percentage points from an unrevised January reading of 58.7 percent. The February reading pointed to the fastest expansion in factory activity since February 2018.

Economists' had forecast the indicator to edge up to 58.8 percent.

A reading above 50 percent indicates expansion, while a reading below 50 percent indicates contraction.

According to the report, the New Orders Index stood at 64.8 percent, up 3.7 percentage points from the January reading, while the Production Index came in at 63.2 percent, a climb of 2.5 percentage points compared to the January reading, the Employment Index was at 54.4 percent, 1.8 percentage points higher from the January reading, the Backlog of Orders Index registered 64 percent, 4.3 percentage points above the January reading and the Supplier Deliveries Index recorded 72 percent, up 3.8 percentage points from the January figure. Meanwhile, the Inventories Index registered 49.7 percent, 1.1 percentage points lower than the January reading. On the price front, the Prices Index posted 86 percent, up 3.9 percentage points compared to the January reading of 82.1 percent.

Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee, noted that the manufacturing economy continued its recovery in February. “Survey committee members that their companies and suppliers continue to operate in reconfigured factories”, he said, adding: "Issues with absenteeism, short-term shutdowns to sanitize facilities, and difficulties in hiring workers remain challenges and continue to cause strains that limit manufacturing-growth potential. Optimistic panel sentiment increased, with five positive comments for every cautious comment, compared to a 3-to-1 ratio in January.” He also said that the past relationship between the PMI and the overall economy indicated that the PMI for February (60.8 percent) corresponds to a 5-percent increase in real gross domestic product (GDP) on an annualized basis.