ISM manufacturing index backslides to 47.8%
The numbers: A barometer of business conditions at American manufacturers fell again in February as orders declined and more workers were laid off, but executives said there were preparing for expansion later in the year.
The Institute for Supply Management’s index of manufacturers dropped to a two-month low of 47.8% in February from 49.1% in the prior month.
Economists polled by the Wall Street Journal had predicted an ISM reading of 49.5%.
Numbers below 50% are viewed as negative for the industrial side of the economy.
Big picture: Manufacturers have endured their worst performance since the Great Recession of 2007-2009, with the ISM index in contractionary territory for 16 months in a row.
Yet the economy has kept growing despite higher interest rates and the prospect of the Federal Reserve reducing borrowing costs later in the year offers fresh hope of a recovery in manufacturing.
“Demand is at the early stages of recovery,” said Timothy Fiore, chairman of the survey, “as panelists’ companies begin to prepare for expansion.”
Key details:
The production gauge slid 2 points to 48.4%.
The new-orders index dropped 3.3 points to 49.2%.
The employment barometer slipped 1.2 points to 45.9%, making the lowest level since last summer.
The prices-paid index, a measure of inflation, dipped 0.4 points to 52.5%.
Looking ahead: “The first quarter will be slower due to some customer order changes, but we are expecting the rest of 2024 to be strong,” a senior transportation executive told ISM. “We may increase our growth projections.”
“We are experiencing increased sales, which is putting pressure on the plant and assembly to meet new customer demand,” said an executive at a maker of electrical products.
Market reaction: The Dow Jones Industrial Average DJIA, +0.23% and S&P 500 SPX, +0.80% were mixed in Friday trades.